Correlation Between World Energy and Horizon Spin-off

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

By analyzing existing cross correlation between World Energy Fund and Horizon Spin Off And, you can compare the effects of market volatilities on World Energy and Horizon Spin-off 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 World Energy with a short position of Horizon Spin-off. Check out your portfolio center. Please also check ongoing floating volatility patterns of World Energy and Horizon Spin-off.

Diversification Opportunities for World Energy and Horizon Spin-off

0.75

Correlation Coefficient

World Energy  Horizon Spin-off

Poor diversification

The 3 months correlation between World and Horizon is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding World Energy Fund and Horizon Spin Off And in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Horizon Spin Off and World Energy 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 World Energy Fund are associated (or correlated) with Horizon Spin-off. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Horizon Spin Off has no effect on the direction of World Energy i.e., World Energy and Horizon Spin-off go up and down completely randomly.

Pair Corralation between World Energy and Horizon Spin-off

Assuming the 90 days horizon World Energy is expected to generate 1.57 times less return on investment than Horizon Spin-off. But when comparing it to its historical volatility, World Energy Fund is 2.65 times less risky than Horizon Spin-off. It trades about 0.18 of its potential returns per unit of risk. Horizon Spin Off And is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  3,315  in Horizon Spin Off And on October 26, 2024 and sell it today you would earn a total of  604.00  from holding Horizon Spin Off And or generate 18.22% return on investment over 90 days.

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

World Energy Fund  vs.  Horizon Spin Off And

World Energy

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in World Energy Fund are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, World Energy showed solid returns over the last few months and may actually be approaching a breakup point.

Horizon Spin Off

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Horizon Spin Off And are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Horizon Spin-off showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with World Energy and Horizon Spin-off

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

The idea behind World Energy Fund and Horizon Spin Off And 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..