Correlation Between Health Care and Horizon Kinetics

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

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

Diversification Opportunities for Health Care and Horizon Kinetics

0.87

Correlation Coefficient

Health Care  Horizon Kinetics

Very poor diversification

The 3 months correlation between Health and Horizon is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Health Care Select and Horizon Kinetics Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Horizon Kinetics Medical and Health Care 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 Health Care Select 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 Medical has no effect on the direction of Health Care i.e., Health Care and Horizon Kinetics go up and down completely randomly.

Pair Corralation between Health Care and Horizon Kinetics

Considering the 90-day investment horizon Health Care Select is expected to generate 0.9 times more return on investment than Horizon Kinetics. However, Health Care Select is 1.12 times less risky than Horizon Kinetics. It trades about -0.23 of its potential returns per unit of risk. Horizon Kinetics Medical is currently generating about -0.34 per unit of risk. If you would invest  14,405  in Health Care Select on October 9, 2024 and sell it today you would lose (503.00) from holding Health Care Select or give up 3.49% of portfolio value over 90 days.

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

Health Care Select  vs.  Horizon Kinetics Medical

Health Care Select

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Health Care Select has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Etf's essential indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the fund sophisticated investors.

Horizon Kinetics Medical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Horizon Kinetics Medical has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Etf's fundamental indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the ETF investors.

Pair Trading with Health Care and Horizon Kinetics

The main advantage of trading using opposite Health Care and Horizon Kinetics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Health Care 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 Health Care Select and Horizon Kinetics Medical 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.