Correlation Between Horizon Active and Ariel International

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

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

Diversification Opportunities for Horizon Active and Ariel International

-0.1

Correlation Coefficient

Horizon Active  Ariel International

Good diversification

The 3 months correlation between Horizon and Ariel is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Horizon Active Risk and Ariel International Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ariel International and Horizon Active 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 Active Risk are associated (or correlated) with Ariel International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ariel International has no effect on the direction of Horizon Active i.e., Horizon Active and Ariel International go up and down completely randomly.

Pair Corralation between Horizon Active and Ariel International

Assuming the 90 days horizon Horizon Active Risk is expected to under-perform the Ariel International. In addition to that, Horizon Active is 1.43 times more volatile than Ariel International Fund. It trades about -0.13 of its total potential returns per unit of risk. Ariel International Fund is currently generating about 0.16 per unit of volatility. If you would invest  1,398  in Ariel International Fund on December 1, 2024 and sell it today you would earn a total of  131.00  from holding Ariel International Fund or generate 9.37% return on investment over 90 days.

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

Horizon Active Risk  vs.  Ariel International Fund

Horizon Active Risk

Risk-Adjusted Performance

Very Weak

Over the last 90 days Horizon Active Risk 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.

Ariel International

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ariel International Fund are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Ariel International may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Horizon Active and Ariel International

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

The idea behind Horizon Active Risk and Ariel International Fund 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.