Correlation Between Horizon Kinetics and Technology Select

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

By analyzing existing cross correlation between Horizon Kinetics Medical and Technology Select Sector, you can compare the effects of market volatilities on Horizon Kinetics and Technology Select 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 Technology Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of Horizon Kinetics and Technology Select.

Diversification Opportunities for Horizon Kinetics and Technology Select

0.2

Correlation Coefficient

Horizon Kinetics  Technology Select

Modest diversification

The 3 months correlation between Horizon and Technology is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Horizon Kinetics Medical and Technology Select Sector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Technology Select Sector 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 Medical are associated (or correlated) with Technology Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Technology Select Sector has no effect on the direction of Horizon Kinetics i.e., Horizon Kinetics and Technology Select go up and down completely randomly.

Pair Corralation between Horizon Kinetics and Technology Select

Given the investment horizon of 90 days Horizon Kinetics Medical is expected to generate 0.67 times more return on investment than Technology Select. However, Horizon Kinetics Medical is 1.49 times less risky than Technology Select. It trades about 0.06 of its potential returns per unit of risk. Technology Select Sector is currently generating about -0.02 per unit of risk. If you would invest  2,792  in Horizon Kinetics Medical on November 28, 2024 and sell it today you would earn a total of  78.00  from holding Horizon Kinetics Medical or generate 2.79% return on investment over 90 days.

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

Horizon Kinetics Medical  vs.  Technology Select Sector

Horizon Kinetics Medical

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Horizon Kinetics Medical are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong fundamental indicators, Horizon Kinetics is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Technology Select Sector

Risk-Adjusted Performance

Very Weak

Over the last 90 days Technology Select Sector has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, Technology Select is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Horizon Kinetics and Technology Select

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

The idea behind Horizon Kinetics Medical and Technology Select Sector 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.