Correlation Between Horizon Defensive and Horizon Esg

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

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

Diversification Opportunities for Horizon Defensive and Horizon Esg

0.8

Correlation Coefficient

Horizon Defensive  Horizon Esg

Very poor diversification

The 3 months correlation between Horizon and Horizon is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Horizon Defensive Equity and Horizon Esg Defensive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Horizon Esg Defensive and Horizon Defensive 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 Defensive Equity are associated (or correlated) with Horizon Esg. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Horizon Esg Defensive has no effect on the direction of Horizon Defensive i.e., Horizon Defensive and Horizon Esg go up and down completely randomly.

Pair Corralation between Horizon Defensive and Horizon Esg

Assuming the 90 days horizon Horizon Defensive is expected to generate 1.24 times less return on investment than Horizon Esg. But when comparing it to its historical volatility, Horizon Defensive Equity is 1.12 times less risky than Horizon Esg. It trades about 0.21 of its potential returns per unit of risk. Horizon Esg Defensive is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  3,990  in Horizon Esg Defensive on May 5, 2025 and sell it today you would earn a total of  400.00  from holding Horizon Esg Defensive or generate 10.03% return on investment over 90 days.

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

Horizon Defensive Equity  vs.  Horizon Esg Defensive

Horizon Defensive Equity

Risk-Adjusted Performance

Solid

Over the last 90 days Horizon Defensive Equity has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly weak basic indicators, Horizon Defensive may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Horizon Esg Defensive

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Horizon Esg Defensive are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Horizon Esg may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Horizon Defensive and Horizon Esg

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

The idea behind Horizon Defensive Equity and Horizon Esg Defensive 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 .