Correlation Between IShares SP and Horizon Kinetics

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

By analyzing existing cross correlation between iShares SP Small Cap and Horizon Kinetics Inflation, you can compare the effects of market volatilities on IShares SP and Horizon Kinetics 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 IShares SP with a short position of Horizon Kinetics. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares SP and Horizon Kinetics.

Diversification Opportunities for IShares SP and Horizon Kinetics

-0.25

Correlation Coefficient

IShares SP  Horizon Kinetics

Very good diversification

The 3 months correlation between IShares and Horizon is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding iShares SP Small Cap and Horizon Kinetics Inflation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Horizon Kinetics Inf and IShares SP 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 iShares SP Small Cap are associated (or correlated) with Horizon Kinetics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Horizon Kinetics Inf has no effect on the direction of IShares SP i.e., IShares SP and Horizon Kinetics go up and down completely randomly.

Pair Corralation between IShares SP and Horizon Kinetics

Considering the 90-day investment horizon iShares SP Small Cap is expected to under-perform the Horizon Kinetics. But the etf apears to be less risky and, when comparing its historical volatility, iShares SP Small Cap is 1.04 times less risky than Horizon Kinetics. The etf trades about -0.15 of its potential returns per unit of risk. The Horizon Kinetics Inflation is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  3,802  in Horizon Kinetics Inflation on December 28, 2024 and sell it today you would earn a total of  302.00  from holding Horizon Kinetics Inflation or generate 7.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

iShares SP Small Cap  vs.  Horizon Kinetics Inflation

iShares SP Small

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares SP Small Cap has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Etf's forward-looking indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the exchange-traded fund private investors.

Horizon Kinetics Inf

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Horizon Kinetics Inflation are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting technical and fundamental indicators, Horizon Kinetics may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with IShares SP and Horizon Kinetics

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

The idea behind iShares SP Small Cap and Horizon Kinetics Inflation 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.