Correlation Between Horizon Defined and Horizon Esg

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

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

Diversification Opportunities for Horizon Defined and Horizon Esg

0.85

Correlation Coefficient

Horizon Defined  Horizon Esg

Very poor diversification

The 3 months correlation between Horizon and Horizon is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Horizon Defined Risk and Horizon Esg Defensive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Horizon Esg Defensive and Horizon Defined 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 Defined Risk are associated (or correlated) with Horizon Esg. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Horizon Esg Defensive has no effect on the direction of Horizon Defined i.e., Horizon Defined and Horizon Esg go up and down completely randomly.

Pair Corralation between Horizon Defined and Horizon Esg

Assuming the 90 days horizon Horizon Defined Risk is expected to generate 0.54 times more return on investment than Horizon Esg. However, Horizon Defined Risk is 1.84 times less risky than Horizon Esg. It trades about -0.04 of its potential returns per unit of risk. Horizon Esg Defensive is currently generating about -0.09 per unit of risk. If you would invest  7,767  in Horizon Defined Risk on December 29, 2024 and sell it today you would lose (123.00) from holding Horizon Defined Risk or give up 1.58% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.39%
Values	Daily Returns

Horizon Defined Risk  vs.  Horizon Esg Defensive

Horizon Defined Risk

Risk-Adjusted Performance

Very Weak

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

Horizon Esg Defensive

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Horizon Defined and Horizon Esg

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

The idea behind Horizon Defined Risk and Horizon Esg Defensive 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.

Check out your portfolio center.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.