Correlation Between Horizon Funds and Horizon Active
Can any of the company-specific risk be diversified away by investing in both Horizon Funds 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 Horizon Funds and Horizon Active into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Horizon Funds and Horizon Active Risk, you can compare the effects of market volatilities on Horizon Funds 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 Horizon Funds with a short position of Horizon Active. Check out your portfolio center. Please also check ongoing floating volatility patterns of Horizon Funds and Horizon Active.
Diversification Opportunities for Horizon Funds and Horizon Active
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Horizon and Horizon is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Horizon Funds and Horizon Active Risk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Horizon Active Risk and Horizon Funds 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 Funds 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 Risk has no effect on the direction of Horizon Funds i.e., Horizon Funds and Horizon Active go up and down completely randomly.
Pair Corralation between Horizon Funds and Horizon Active
Assuming the 90 days horizon Horizon Funds is expected to generate 3.9 times less return on investment than Horizon Active. But when comparing it to its historical volatility, Horizon Funds is 2.4 times less risky than Horizon Active. It trades about 0.06 of its potential returns per unit of risk. Horizon Active Risk is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 2,057 in Horizon Active Risk on August 31, 2024 and sell it today you would earn a total of 667.00 from holding Horizon Active Risk or generate 32.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Horizon Funds vs. Horizon Active Risk
Performance |
| Timeline |
| Horizon Funds |
| Horizon Active Risk |
Horizon Funds and Horizon Active Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Horizon Funds and Horizon Active
The main advantage of trading using opposite Horizon Funds and Horizon Active positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Horizon Funds 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.| Horizon Funds vs. Mesirow Financial Small | Horizon Funds vs. Transamerica Financial Life | Horizon Funds vs. Gabelli Global Financial | Horizon Funds vs. John Hancock Financial |
| Horizon Active vs. Ab Bond Inflation | Horizon Active vs. Aqr Managed Futures | Horizon Active vs. Blackrock Inflation Protected | Horizon Active vs. Fidelity Advisor 529 |
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 Stocks Directory module to find actively traded stocks across global markets.
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