Correlation Between Alpine High and Horizon Defensive

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

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

Diversification Opportunities for Alpine High and Horizon Defensive

0.64

Correlation Coefficient

Alpine High  Horizon Defensive

Poor diversification

The 3 months correlation between Alpine and Horizon is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Alpine High Yield and Horizon Defensive Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Horizon Defensive Equity and Alpine High 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 Alpine High Yield are associated (or correlated) with Horizon Defensive. 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 Equity has no effect on the direction of Alpine High i.e., Alpine High and Horizon Defensive go up and down completely randomly.

Pair Corralation between Alpine High and Horizon Defensive

Assuming the 90 days horizon Alpine High is expected to generate 2.33 times less return on investment than Horizon Defensive. But when comparing it to its historical volatility, Alpine High Yield is 5.19 times less risky than Horizon Defensive. It trades about 0.14 of its potential returns per unit of risk. Horizon Defensive Equity is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  2,677  in Horizon Defensive Equity on September 23, 2024 and sell it today you would earn a total of  372.00  from holding Horizon Defensive Equity or generate 13.9% return on investment over 90 days.

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

Alpine High Yield  vs.  Horizon Defensive Equity

Alpine High Yield

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alpine High Yield has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong primary indicators, Alpine High is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Horizon Defensive Equity

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Horizon Defensive Equity has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Alpine High and Horizon Defensive

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

The idea behind Alpine High Yield and Horizon Defensive Equity 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.