Correlation Between Ab Select and Horizon Us

Can any of the company-specific risk be diversified away by investing in both Ab Select and Horizon Us 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 Us 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 Defensive Equity, you can compare the effects of market volatilities on Ab Select and Horizon Us 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 Us. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ab Select and Horizon Us.

Diversification Opportunities for Ab Select and Horizon Us

0.98

Correlation Coefficient

Ab Select  Horizon Us

Almost no diversification

The 3 months correlation between AUUIX and Horizon is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Ab Select Equity 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 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 Us. 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 Ab Select i.e., Ab Select and Horizon Us go up and down completely randomly.

Pair Corralation between Ab Select and Horizon Us

Assuming the 90 days horizon Ab Select Equity is expected to generate 1.16 times more return on investment than Horizon Us. However, Ab Select is 1.16 times more volatile than Horizon Defensive Equity. It trades about 0.19 of its potential returns per unit of risk. Horizon Defensive Equity is currently generating about 0.17 per unit of risk. If you would invest  2,218  in Ab Select Equity on August 31, 2024 and sell it today you would earn a total of  180.00  from holding Ab Select Equity or generate 8.12% return on investment over 90 days.

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

Ab Select Equity  vs.  Horizon Defensive Equity

Ab Select Equity

Risk-Adjusted Performance

14 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ab Select Equity are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Ab Select may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Horizon Defensive Equity

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Horizon Defensive Equity are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Horizon Us may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Ab Select and Horizon Us

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

The idea behind Ab Select Equity 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.