Correlation Between Thrivent Diversified and Thrivent Municipal
Can any of the company-specific risk be diversified away by investing in both Thrivent Diversified and Thrivent Municipal 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 Thrivent Diversified and Thrivent Municipal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Thrivent Diversified Income and Thrivent Municipal Bond, you can compare the effects of market volatilities on Thrivent Diversified and Thrivent Municipal 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 Thrivent Diversified with a short position of Thrivent Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Thrivent Diversified and Thrivent Municipal.
Diversification Opportunities for Thrivent Diversified and Thrivent Municipal
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Thrivent and Thrivent is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Thrivent Diversified Income and Thrivent Municipal Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thrivent Municipal Bond and Thrivent Diversified 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 Thrivent Diversified Income are associated (or correlated) with Thrivent Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thrivent Municipal Bond has no effect on the direction of Thrivent Diversified i.e., Thrivent Diversified and Thrivent Municipal go up and down completely randomly.
Pair Corralation between Thrivent Diversified and Thrivent Municipal
Assuming the 90 days horizon Thrivent Diversified Income is expected to generate 1.2 times more return on investment than Thrivent Municipal. However, Thrivent Diversified is 1.2 times more volatile than Thrivent Municipal Bond. It trades about 0.11 of its potential returns per unit of risk. Thrivent Municipal Bond is currently generating about 0.08 per unit of risk. If you would invest 632.00 in Thrivent Diversified Income on September 1, 2024 and sell it today you would earn a total of 89.00 from holding Thrivent Diversified Income or generate 14.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Thrivent Diversified Income vs. Thrivent Municipal Bond
Performance |
| Timeline |
| Thrivent Diversified |
| Thrivent Municipal Bond |
Thrivent Diversified and Thrivent Municipal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Thrivent Diversified and Thrivent Municipal
The main advantage of trading using opposite Thrivent Diversified and Thrivent Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Thrivent Diversified position performs unexpectedly, Thrivent Municipal 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 Thrivent Municipal will offset losses from the drop in Thrivent Municipal's long position.The idea behind Thrivent Diversified Income and Thrivent Municipal Bond 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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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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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