Correlation Between Small Cap and Horizon Us
Can any of the company-specific risk be diversified away by investing in both Small Cap and Horizon Us 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 Small Cap and Horizon Us into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Small Cap Equity and Horizon Defensive Equity, you can compare the effects of market volatilities on Small Cap and Horizon Us 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 Small Cap with a short position of Horizon Us. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Horizon Us.
Diversification Opportunities for Small Cap and Horizon Us
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Small and Horizon is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Equity and Horizon Defensive Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Horizon Defensive Equity and Small Cap 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 Small Cap Equity are associated (or correlated) with Horizon Us. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Horizon Defensive Equity has no effect on the direction of Small Cap i.e., Small Cap and Horizon Us go up and down completely randomly.
Pair Corralation between Small Cap and Horizon Us
Assuming the 90 days horizon Small Cap Equity is expected to generate 2.08 times more return on investment than Horizon Us. However, Small Cap is 2.08 times more volatile than Horizon Defensive Equity. It trades about 0.16 of its potential returns per unit of risk. Horizon Defensive Equity is currently generating about 0.18 per unit of risk. If you would invest 1,803 in Small Cap Equity on September 2, 2024 and sell it today you would earn a total of 228.00 from holding Small Cap Equity or generate 12.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Small Cap Equity vs. Horizon Defensive Equity
Performance |
| Timeline |
| Small Cap Equity |
| Horizon Defensive Equity |
Small Cap and Horizon Us Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Cap and Horizon Us
The main advantage of trading using opposite Small Cap and Horizon Us positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap position performs unexpectedly, Horizon Us 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 Us will offset losses from the drop in Horizon Us' long position.| Small Cap vs. Growth Allocation Fund | Small Cap vs. Defensive Market Strategies | Small Cap vs. Defensive Market Strategies | Small Cap vs. Value Equity Institutional |
| Horizon Us vs. Volumetric Fund Volumetric | Horizon Us vs. Fa 529 Aggressive | Horizon Us vs. Leggmason Partners Institutional | Horizon Us vs. Abr 7525 Volatility |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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