Correlation Between Ab Bond and Horizon Defensive
Can any of the company-specific risk be diversified away by investing in both Ab Bond and Horizon Defensive 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 Ab Bond and Horizon Defensive into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ab Bond Inflation and Horizon Defensive Equity, you can compare the effects of market volatilities on Ab Bond and Horizon Defensive 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 Ab Bond with a short position of Horizon Defensive. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ab Bond and Horizon Defensive.
Diversification Opportunities for Ab Bond and Horizon Defensive
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ABNYX and Horizon is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Ab Bond Inflation and Horizon Defensive Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Horizon Defensive Equity and Ab Bond 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 Ab Bond Inflation are associated (or correlated) with Horizon Defensive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Horizon Defensive Equity has no effect on the direction of Ab Bond i.e., Ab Bond and Horizon Defensive go up and down completely randomly.
Pair Corralation between Ab Bond and Horizon Defensive
Assuming the 90 days horizon Ab Bond is expected to generate 1.72 times less return on investment than Horizon Defensive. But when comparing it to its historical volatility, Ab Bond Inflation is 5.57 times less risky than Horizon Defensive. It trades about 0.14 of its potential returns per unit of risk. Horizon Defensive Equity is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 3,100 in Horizon Defensive Equity on May 2, 2025 and sell it today you would earn a total of 186.00 from holding Horizon Defensive Equity or generate 6.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ab Bond Inflation vs. Horizon Defensive Equity
Performance |
| Timeline |
| Ab Bond Inflation |
| Horizon Defensive Equity |
Ab Bond and Horizon Defensive Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ab Bond and Horizon Defensive
The main advantage of trading using opposite Ab Bond and Horizon Defensive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ab Bond position performs unexpectedly, Horizon Defensive 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 Defensive will offset losses from the drop in Horizon Defensive's long position.| Ab Bond vs. Needham Small Cap | Ab Bond vs. Glg Intl Small | Ab Bond vs. Scout Small Cap | Ab Bond vs. Guidemark Smallmid Cap |
| Horizon Defensive vs. Enhanced Fixed Income | Horizon Defensive vs. Smallcap World Fund | Horizon Defensive vs. Franklin Equity Income | Horizon Defensive vs. Dodge International Stock |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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