Correlation Between Thornburg Intermediate and Thornburg Limited
Can any of the company-specific risk be diversified away by investing in both Thornburg Intermediate 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 Thornburg Intermediate and Thornburg Limited into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Thornburg Intermediate Municipal and Thornburg Limited Term, you can compare the effects of market volatilities on Thornburg Intermediate 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 Thornburg Intermediate with a short position of Thornburg Limited. Check out your portfolio center. Please also check ongoing floating volatility patterns of Thornburg Intermediate and Thornburg Limited.
Diversification Opportunities for Thornburg Intermediate and Thornburg Limited
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Thornburg and Thornburg is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Thornburg Intermediate Municip 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 Thornburg Intermediate 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 Intermediate 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 Thornburg Intermediate i.e., Thornburg Intermediate and Thornburg Limited go up and down completely randomly.
Pair Corralation between Thornburg Intermediate and Thornburg Limited
Assuming the 90 days horizon Thornburg Intermediate is expected to generate 1.06 times less return on investment than Thornburg Limited. But when comparing it to its historical volatility, Thornburg Intermediate Municipal is 1.2 times less risky than Thornburg Limited. It trades about 0.14 of its potential returns per unit of risk. Thornburg Limited Term is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 1,157 in Thornburg Limited Term on August 29, 2024 and sell it today you would earn a total of 39.00 from holding Thornburg Limited Term or generate 3.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Thornburg Intermediate Municip vs. Thornburg Limited Term
Performance |
| Timeline |
| Thornburg Intermediate |
| Thornburg Limited Term |
Thornburg Intermediate and Thornburg Limited Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Thornburg Intermediate and Thornburg Limited
The main advantage of trading using opposite Thornburg Intermediate and Thornburg Limited positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Thornburg Intermediate 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.The idea behind Thornburg Intermediate Municipal and Thornburg Limited Term 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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