Correlation Between California High-yield and Thornburg Limited
Can any of the company-specific risk be diversified away by investing in both California High-yield and Thornburg Limited 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 California High-yield and Thornburg Limited into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between California High Yield Municipal and Thornburg Limited Term, you can compare the effects of market volatilities on California High-yield and Thornburg Limited 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 California High-yield with a short position of Thornburg Limited. Check out your portfolio center. Please also check ongoing floating volatility patterns of California High-yield and Thornburg Limited.
Diversification Opportunities for California High-yield and Thornburg Limited
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between California and Thornburg is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding California High Yield Municipa and Thornburg Limited Term in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thornburg Limited Term and California High-yield 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 California High Yield Municipal are associated (or correlated) with Thornburg Limited. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thornburg Limited Term has no effect on the direction of California High-yield i.e., California High-yield and Thornburg Limited go up and down completely randomly.
Pair Corralation between California High-yield and Thornburg Limited
Assuming the 90 days horizon California High Yield Municipal is expected to generate 1.74 times more return on investment than Thornburg Limited. However, California High-yield is 1.74 times more volatile than Thornburg Limited Term. It trades about 0.18 of its potential returns per unit of risk. Thornburg Limited Term is currently generating about 0.09 per unit of risk. If you would invest 980.00 in California High Yield Municipal on August 29, 2024 and sell it today you would earn a total of 13.00 from holding California High Yield Municipal or generate 1.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
California High Yield Municipa vs. Thornburg Limited Term
Performance |
| Timeline |
| California High Yield |
| Thornburg Limited Term |
California High-yield and Thornburg Limited Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with California High-yield and Thornburg Limited
The main advantage of trading using opposite California High-yield and Thornburg Limited positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if California High-yield position performs unexpectedly, Thornburg Limited 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 Thornburg Limited will offset losses from the drop in Thornburg Limited's long position.| California High-yield vs. Davis Financial Fund | California High-yield vs. Icon Financial Fund | California High-yield vs. Financial Industries Fund | California High-yield vs. Transamerica Financial Life |
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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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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