Correlation Between Health Care and Thornburg Low
Can any of the company-specific risk be diversified away by investing in both Health Care and Thornburg Low 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 Health Care and Thornburg Low into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Health Care Fund and Thornburg Low Duration, you can compare the effects of market volatilities on Health Care and Thornburg Low 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 Health Care with a short position of Thornburg Low. Check out your portfolio center. Please also check ongoing floating volatility patterns of Health Care and Thornburg Low.
Diversification Opportunities for Health Care and Thornburg Low
-0.81 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between HEALTH and Thornburg is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Health Care Fund and Thornburg Low Duration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thornburg Low Duration and Health Care 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 Health Care Fund are associated (or correlated) with Thornburg Low. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thornburg Low Duration has no effect on the direction of Health Care i.e., Health Care and Thornburg Low go up and down completely randomly.
Pair Corralation between Health Care and Thornburg Low
Assuming the 90 days horizon Health Care is expected to generate 2.05 times less return on investment than Thornburg Low. In addition to that, Health Care is 7.22 times more volatile than Thornburg Low Duration. It trades about 0.01 of its total potential returns per unit of risk. Thornburg Low Duration is currently generating about 0.21 per unit of volatility. If you would invest 1,176 in Thornburg Low Duration on September 1, 2024 and sell it today you would earn a total of 46.00 from holding Thornburg Low Duration or generate 3.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Health Care Fund vs. Thornburg Low Duration
Performance |
| Timeline |
| Health Care Fund |
| Thornburg Low Duration |
Health Care and Thornburg Low Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Health Care and Thornburg Low
The main advantage of trading using opposite Health Care and Thornburg Low positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Health Care position performs unexpectedly, Thornburg Low 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 Low will offset losses from the drop in Thornburg Low's long position.| Health Care vs. Banking Fund Class | Health Care vs. Basic Materials Fund | Health Care vs. Biotechnology Fund Class | Health Care vs. Government Long Bond |
| Thornburg Low vs. Health Care Fund | Thornburg Low vs. The Gabelli Healthcare | Thornburg Low vs. Blackrock Health Sciences | Thornburg Low vs. Allianzgi Health Sciences |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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