Correlation Between Horizon Kinetics and IShares Small

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

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

Diversification Opportunities for Horizon Kinetics and IShares Small

0.84

Correlation Coefficient

Horizon Kinetics  IShares Small

Very poor diversification

The 3 months correlation between Horizon and IShares is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Horizon Kinetics Inflation and iShares Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Small Cap and Horizon Kinetics 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 Kinetics Inflation are associated (or correlated) with IShares Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Small Cap has no effect on the direction of Horizon Kinetics i.e., Horizon Kinetics and IShares Small go up and down completely randomly.

Pair Corralation between Horizon Kinetics and IShares Small

Given the investment horizon of 90 days Horizon Kinetics Inflation is expected to under-perform the IShares Small. In addition to that, Horizon Kinetics is 1.48 times more volatile than iShares Small Cap. It trades about -0.05 of its total potential returns per unit of risk. iShares Small Cap is currently generating about 0.0 per unit of volatility. If you would invest  3,531  in iShares Small Cap on September 13, 2024 and sell it today you would lose (4.00) from holding iShares Small Cap or give up 0.11% of portfolio value over 90 days.

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

Horizon Kinetics Inflation  vs.  iShares Small Cap

Horizon Kinetics Inf

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Horizon Kinetics Inflation are ranked lower than 13 (%) 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 January 2025.

iShares Small Cap

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Small Cap are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, IShares Small may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Horizon Kinetics and IShares Small

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

The idea behind Horizon Kinetics Inflation and iShares Small Cap 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .