Correlation Between Dow Jones and Horizon Active
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Horizon Active 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 Dow Jones and Horizon Active into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and Horizon Active Dividend, you can compare the effects of market volatilities on Dow Jones and Horizon Active 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 Dow Jones with a short position of Horizon Active. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Horizon Active.
Diversification Opportunities for Dow Jones and Horizon Active
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Dow and HORIZON is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Horizon Active Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Horizon Active Dividend and Dow Jones 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 Dow Jones Industrial are associated (or correlated) with Horizon Active. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Horizon Active Dividend has no effect on the direction of Dow Jones i.e., Dow Jones and Horizon Active go up and down completely randomly.
Pair Corralation between Dow Jones and Horizon Active
Assuming the 90 days trading horizon Dow Jones is expected to generate 1.04 times less return on investment than Horizon Active. In addition to that, Dow Jones is 1.1 times more volatile than Horizon Active Dividend. It trades about 0.12 of its total potential returns per unit of risk. Horizon Active Dividend is currently generating about 0.13 per unit of volatility. If you would invest 5,628 in Horizon Active Dividend on August 31, 2024 and sell it today you would earn a total of 1,952 from holding Horizon Active Dividend or generate 34.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. Horizon Active Dividend
Performance |
| Timeline |
Dow Jones and Horizon Active Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Horizon Active Dividend
Pair trading matchups for Horizon Active
Pair Trading with Dow Jones and Horizon Active
The main advantage of trading using opposite Dow Jones and Horizon Active positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Horizon Active 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 Active will offset losses from the drop in Horizon Active's long position.| Dow Jones vs. Aerofoam Metals | Dow Jones vs. ACG Metals Limited | Dow Jones vs. China Clean Energy | Dow Jones vs. Fast Retailing Co |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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