Correlation Between Thornburg Limited and California Bond
Can any of the company-specific risk be diversified away by investing in both Thornburg Limited and California Bond 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 Thornburg Limited and California Bond into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Thornburg Limited Term and California Bond Fund, you can compare the effects of market volatilities on Thornburg Limited and California Bond 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 Thornburg Limited with a short position of California Bond. Check out your portfolio center. Please also check ongoing floating volatility patterns of Thornburg Limited and California Bond.
Diversification Opportunities for Thornburg Limited and California Bond
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Thornburg and California is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Thornburg Limited Term and California Bond Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on California Bond and Thornburg Limited 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 Thornburg Limited Term are associated (or correlated) with California Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of California Bond has no effect on the direction of Thornburg Limited i.e., Thornburg Limited and California Bond go up and down completely randomly.
Pair Corralation between Thornburg Limited and California Bond
Assuming the 90 days horizon Thornburg Limited is expected to generate 1.4 times less return on investment than California Bond. In addition to that, Thornburg Limited is 1.06 times more volatile than California Bond Fund. It trades about 0.05 of its total potential returns per unit of risk. California Bond Fund is currently generating about 0.07 per unit of volatility. If you would invest 964.00 in California Bond Fund on August 30, 2024 and sell it today you would earn a total of 87.00 from holding California Bond Fund or generate 9.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Thornburg Limited Term vs. California Bond Fund
Performance |
| Timeline |
| Thornburg Limited Term |
| California Bond |
Thornburg Limited and California Bond Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Thornburg Limited and California Bond
The main advantage of trading using opposite Thornburg Limited and California Bond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Thornburg Limited position performs unexpectedly, California Bond 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 California Bond will offset losses from the drop in California Bond's long position.| Thornburg Limited vs. Bbh Intermediate Municipal | Thornburg Limited vs. Icon Bond Fund | Thornburg Limited vs. Maryland Tax Free Bond | Thornburg Limited vs. Multisector Bond Sma |
| California Bond vs. HUMANA INC | California Bond vs. Aquagold International | California Bond vs. Barloworld Ltd ADR | California Bond vs. Morningstar Unconstrained Allocation |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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