Correlation Between Thompson Bond and Bright Rock
Can any of the company-specific risk be diversified away by investing in both Thompson Bond and Bright Rock 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 Thompson Bond and Bright Rock into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Thompson Bond Fund and Bright Rock Quality, you can compare the effects of market volatilities on Thompson Bond and Bright Rock 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 Thompson Bond with a short position of Bright Rock. Check out your portfolio center. Please also check ongoing floating volatility patterns of Thompson Bond and Bright Rock.
Diversification Opportunities for Thompson Bond and Bright Rock
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Thompson and Bright is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Thompson Bond Fund and Bright Rock Quality in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bright Rock Quality and Thompson Bond 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 Thompson Bond Fund are associated (or correlated) with Bright Rock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bright Rock Quality has no effect on the direction of Thompson Bond i.e., Thompson Bond and Bright Rock go up and down completely randomly.
Pair Corralation between Thompson Bond and Bright Rock
Assuming the 90 days horizon Thompson Bond is expected to generate 2.17 times less return on investment than Bright Rock. But when comparing it to its historical volatility, Thompson Bond Fund is 5.11 times less risky than Bright Rock. It trades about 0.25 of its potential returns per unit of risk. Bright Rock Quality is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 1,743 in Bright Rock Quality on August 30, 2024 and sell it today you would earn a total of 747.00 from holding Bright Rock Quality or generate 42.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Thompson Bond Fund vs. Bright Rock Quality
Performance |
| Timeline |
| Thompson Bond |
| Bright Rock Quality |
Thompson Bond and Bright Rock Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Thompson Bond and Bright Rock
The main advantage of trading using opposite Thompson Bond and Bright Rock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Thompson Bond position performs unexpectedly, Bright Rock 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 Bright Rock will offset losses from the drop in Bright Rock's long position.| Thompson Bond vs. Tcw Total Return | Thompson Bond vs. Amg Yacktman Focused | Thompson Bond vs. Fidelity Advisor Floating | Thompson Bond vs. Doubleline Total Return |
| Bright Rock vs. Versatile Bond Portfolio | Bright Rock vs. Nebraska Municipal Fund | Bright Rock vs. Barings Active Short | Bright Rock vs. Transamerica Emerging Markets |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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