Correlation Between Horizon Active and Horizon Defined
Can any of the company-specific risk be diversified away by investing in both Horizon Active and Horizon Defined at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Horizon Active and Horizon Defined into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Horizon Active Risk and Horizon Defined Risk, you can compare the effects of market volatilities on Horizon Active and Horizon Defined and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Horizon Active with a short position of Horizon Defined. Check out your portfolio center. Please also check ongoing floating volatility patterns of Horizon Active and Horizon Defined.
Diversification Opportunities for Horizon Active and Horizon Defined
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Horizon and Horizon is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Horizon Active Risk and Horizon Defined Risk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Horizon Defined Risk and Horizon Active is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Horizon Active Risk are associated (or correlated) with Horizon Defined. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Horizon Defined Risk has no effect on the direction of Horizon Active i.e., Horizon Active and Horizon Defined go up and down completely randomly.
Pair Corralation between Horizon Active and Horizon Defined
Assuming the 90 days horizon Horizon Active is expected to generate 2.8 times less return on investment than Horizon Defined. In addition to that, Horizon Active is 1.58 times more volatile than Horizon Defined Risk. It trades about 0.04 of its total potential returns per unit of risk. Horizon Defined Risk is currently generating about 0.19 per unit of volatility. If you would invest 7,637 in Horizon Defined Risk on August 27, 2024 and sell it today you would earn a total of 128.00 from holding Horizon Defined Risk or generate 1.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Horizon Active Risk vs. Horizon Defined Risk
Performance |
| Timeline |
| Horizon Active Risk |
| Horizon Defined Risk |
Horizon Active and Horizon Defined Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Horizon Active and Horizon Defined
The main advantage of trading using opposite Horizon Active and Horizon Defined positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Horizon Active position performs unexpectedly, Horizon Defined can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Horizon Defined will offset losses from the drop in Horizon Defined's long position.| Horizon Active vs. Horizon Active Asset | Horizon Active vs. Horizon Active Dividend | Horizon Active vs. Horizon Defined Risk | Horizon Active vs. Horizon Defensive Equity |
| Horizon Defined vs. Ishares Municipal Bond | Horizon Defined vs. Morningstar Municipal Bond | Horizon Defined vs. Bbh Intermediate Municipal | Horizon Defined vs. Dws Government Money |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Money Managers module to screen money managers from public funds and ETFs managed around the world.
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