Correlation Between Ab Select and Horizon Funds

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

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

Diversification Opportunities for Ab Select and Horizon Funds

0.65

Correlation Coefficient

Ab Select  Horizon Funds

Poor diversification

The 3 months correlation between AUUIX and Horizon is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Ab Select Equity and Horizon Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Horizon Funds and Ab Select 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 Ab Select Equity are associated (or correlated) with Horizon Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Horizon Funds has no effect on the direction of Ab Select i.e., Ab Select and Horizon Funds go up and down completely randomly.

Pair Corralation between Ab Select and Horizon Funds

Assuming the 90 days horizon Ab Select Equity is expected to under-perform the Horizon Funds. In addition to that, Ab Select is 2.92 times more volatile than Horizon Funds . It trades about -0.15 of its total potential returns per unit of risk. Horizon Funds is currently generating about -0.13 per unit of volatility. If you would invest  4,842  in Horizon Funds on October 7, 2024 and sell it today you would lose (114.00) from holding Horizon Funds or give up 2.35% of portfolio value over 90 days.

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

Ab Select Equity  vs.  Horizon Funds

Ab Select Equity

Risk-Adjusted Performance

0 of 100

Very Weak

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

Horizon Funds

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Ab Select and Horizon Funds

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

The idea behind Ab Select Equity and Horizon Funds 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.