Correlation Between Vanguard 500 and Horizon Active
Can any of the company-specific risk be diversified away by investing in both Vanguard 500 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 Vanguard 500 and Horizon Active into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard 500 Index and Horizon Active Dividend, you can compare the effects of market volatilities on Vanguard 500 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 Vanguard 500 with a short position of Horizon Active. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard 500 and Horizon Active.
Diversification Opportunities for Vanguard 500 and Horizon Active
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Vanguard and Horizon is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard 500 Index 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 Vanguard 500 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 Vanguard 500 Index 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 Vanguard 500 i.e., Vanguard 500 and Horizon Active go up and down completely randomly.
Pair Corralation between Vanguard 500 and Horizon Active
Assuming the 90 days horizon Vanguard 500 Index is expected to generate 1.23 times more return on investment than Horizon Active. However, Vanguard 500 is 1.23 times more volatile than Horizon Active Dividend. It trades about 0.12 of its potential returns per unit of risk. Horizon Active Dividend is currently generating about 0.06 per unit of risk. If you would invest 53,537 in Vanguard 500 Index on August 24, 2024 and sell it today you would earn a total of 1,155 from holding Vanguard 500 Index or generate 2.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard 500 Index vs. Horizon Active Dividend
Performance |
| Timeline |
| Vanguard 500 Index |
| Horizon Active Dividend |
Vanguard 500 and Horizon Active Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard 500 and Horizon Active
The main advantage of trading using opposite Vanguard 500 and Horizon Active positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard 500 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.| Vanguard 500 vs. Vanguard Total Stock | Vanguard 500 vs. Vanguard Total Bond | Vanguard 500 vs. Vanguard Windsor Ii | Vanguard 500 vs. Vanguard Small Cap Index |
| Horizon Active vs. Tiaa Cref Real Estate | Horizon Active vs. Global Real Estate | Horizon Active vs. Prudential Real Estate | Horizon Active vs. Jhancock Real Estate |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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