Correlation Between All Asset and Horizon Active
Can any of the company-specific risk be diversified away by investing in both All Asset 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 All Asset and Horizon Active into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between All Asset Fund and Horizon Active Risk, you can compare the effects of market volatilities on All Asset 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 All Asset with a short position of Horizon Active. Check out your portfolio center. Please also check ongoing floating volatility patterns of All Asset and Horizon Active.
Diversification Opportunities for All Asset and Horizon Active
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between All and Horizon is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding All Asset Fund 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 All Asset 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 All Asset Fund 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 All Asset i.e., All Asset and Horizon Active go up and down completely randomly.
Pair Corralation between All Asset and Horizon Active
Assuming the 90 days horizon All Asset is expected to generate 4.74 times less return on investment than Horizon Active. But when comparing it to its historical volatility, All Asset Fund is 1.82 times less risky than Horizon Active. It trades about 0.05 of its potential returns per unit of risk. Horizon Active Risk is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 2,625 in Horizon Active Risk on September 2, 2024 and sell it today you would earn a total of 126.00 from holding Horizon Active Risk or generate 4.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
All Asset Fund vs. Horizon Active Risk
Performance |
| Timeline |
| All Asset Fund |
| Horizon Active Risk |
All Asset and Horizon Active Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with All Asset and Horizon Active
The main advantage of trading using opposite All Asset and Horizon Active positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if All Asset 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.| All Asset vs. Franklin High Income | All Asset vs. Aqr Risk Balanced Modities | All Asset vs. Needham Aggressive Growth | All Asset vs. Western Asset High |
| Horizon Active vs. Horizon Active Asset | Horizon Active vs. Horizon Active Dividend | Horizon Active vs. Horizon Defined Risk | Horizon Active vs. Horizon Defensive Equity |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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