Correlation Between Rational Defensive and Thornburg Core
Can any of the company-specific risk be diversified away by investing in both Rational Defensive and Thornburg Core 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 Rational Defensive and Thornburg Core into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rational Defensive Growth and Thornburg E Growth, you can compare the effects of market volatilities on Rational Defensive and Thornburg Core 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 Rational Defensive with a short position of Thornburg Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rational Defensive and Thornburg Core.
Diversification Opportunities for Rational Defensive and Thornburg Core
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Rational and Thornburg is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Rational Defensive Growth and Thornburg E Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thornburg E Growth and Rational 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 Rational Defensive Growth are associated (or correlated) with Thornburg Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thornburg E Growth has no effect on the direction of Rational Defensive i.e., Rational Defensive and Thornburg Core go up and down completely randomly.
Pair Corralation between Rational Defensive and Thornburg Core
Assuming the 90 days horizon Rational Defensive is expected to generate 1.24 times less return on investment than Thornburg Core. But when comparing it to its historical volatility, Rational Defensive Growth is 1.79 times less risky than Thornburg Core. It trades about 0.44 of its potential returns per unit of risk. Thornburg E Growth is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest 2,939 in Thornburg E Growth on September 3, 2024 and sell it today you would earn a total of 277.00 from holding Thornburg E Growth or generate 9.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Rational Defensive Growth vs. Thornburg E Growth
Performance |
| Timeline |
| Rational Defensive Growth |
| Thornburg E Growth |
Rational Defensive and Thornburg Core Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rational Defensive and Thornburg Core
The main advantage of trading using opposite Rational Defensive and Thornburg Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rational Defensive position performs unexpectedly, Thornburg Core 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 Core will offset losses from the drop in Thornburg Core's long position.The idea behind Rational Defensive Growth and Thornburg E Growth 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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