Correlation Between Horizon Technology and Rand Capital

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

By analyzing existing cross correlation between Horizon Technology Finance and Rand Capital Corp, you can compare the effects of market volatilities on Horizon Technology and Rand Capital 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 Technology with a short position of Rand Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Horizon Technology and Rand Capital.

Diversification Opportunities for Horizon Technology and Rand Capital

0.57

Correlation Coefficient

Horizon Technology  Rand Capital

Very weak diversification

The 3 months correlation between Horizon and Rand is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Horizon Technology Finance and Rand Capital Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rand Capital Corp and Horizon Technology 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 Technology Finance are associated (or correlated) with Rand Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rand Capital Corp has no effect on the direction of Horizon Technology i.e., Horizon Technology and Rand Capital go up and down completely randomly.

Pair Corralation between Horizon Technology and Rand Capital

Given the investment horizon of 90 days Horizon Technology Finance is expected to under-perform the Rand Capital. But the stock apears to be less risky and, when comparing its historical volatility, Horizon Technology Finance is 1.47 times less risky than Rand Capital. The stock trades about 0.0 of its potential returns per unit of risk. The Rand Capital Corp is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,249  in Rand Capital Corp on September 5, 2024 and sell it today you would earn a total of  423.00  from holding Rand Capital Corp or generate 33.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	88.08%
Values	Daily Returns

Horizon Technology Finance  vs.  Rand Capital Corp

Horizon Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Horizon Technology Finance has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Rand Capital Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rand Capital Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Horizon Technology and Rand Capital

The main advantage of trading using opposite Horizon Technology and Rand Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Horizon Technology position performs unexpectedly, Rand Capital 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 Rand Capital will offset losses from the drop in Rand Capital's long position.

The idea behind Horizon Technology Finance and Rand Capital Corp 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.