Correlation Between Horizon Defined and Horizon Us

Can any of the company-specific risk be diversified away by investing in both Horizon Defined 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 Horizon Defined and Horizon Us into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Horizon Defined Risk and Horizon Defensive Smmd, you can compare the effects of market volatilities on Horizon Defined 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 Horizon Defined with a short position of Horizon Us. Check out your portfolio center. Please also check ongoing floating volatility patterns of Horizon Defined and Horizon Us.

Diversification Opportunities for Horizon Defined and Horizon Us

0.92

Correlation Coefficient

Horizon Defined  Horizon Us

Almost no diversification

The 3 months correlation between Horizon and Horizon is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Horizon Defined Risk and Horizon Defensive Smmd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Horizon Defensive Smmd and Horizon Defined 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 Defined Risk 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 Smmd has no effect on the direction of Horizon Defined i.e., Horizon Defined and Horizon Us go up and down completely randomly.

Pair Corralation between Horizon Defined and Horizon Us

Assuming the 90 days horizon Horizon Defined is expected to generate 1.98 times less return on investment than Horizon Us. But when comparing it to its historical volatility, Horizon Defined Risk is 2.48 times less risky than Horizon Us. It trades about 0.25 of its potential returns per unit of risk. Horizon Defensive Smmd is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  3,602  in Horizon Defensive Smmd on August 31, 2024 and sell it today you would earn a total of  430.00  from holding Horizon Defensive Smmd or generate 11.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Horizon Defined Risk  vs.  Horizon Defensive Smmd

Horizon Defined Risk

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Horizon Defined Risk are ranked lower than 19 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Horizon Defined is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Horizon Defensive Smmd

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Horizon Defensive Smmd are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Horizon Us may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Horizon Defined and Horizon Us

The main advantage of trading using opposite Horizon Defined and Horizon Us positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Horizon Defined 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.

The idea behind Horizon Defined Risk and Horizon Defensive Smmd pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.