Correlation Between Thornburg International and Dynamic International
Can any of the company-specific risk be diversified away by investing in both Thornburg International and Dynamic International 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 International and Dynamic International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Thornburg International Growth and Dynamic International Opportunity, you can compare the effects of market volatilities on Thornburg International and Dynamic International 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 International with a short position of Dynamic International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Thornburg International and Dynamic International.
Diversification Opportunities for Thornburg International and Dynamic International
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Thornburg and Dynamic is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Thornburg International Growth and Dynamic International Opportun in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dynamic International and Thornburg International 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 International Growth are associated (or correlated) with Dynamic International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dynamic International has no effect on the direction of Thornburg International i.e., Thornburg International and Dynamic International go up and down completely randomly.
Pair Corralation between Thornburg International and Dynamic International
Assuming the 90 days horizon Thornburg International Growth is expected to under-perform the Dynamic International. In addition to that, Thornburg International is 1.96 times more volatile than Dynamic International Opportunity. It trades about -0.26 of its total potential returns per unit of risk. Dynamic International Opportunity is currently generating about -0.2 per unit of volatility. If you would invest 1,337 in Dynamic International Opportunity on August 29, 2024 and sell it today you would lose (73.00) from holding Dynamic International Opportunity or give up 5.46% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Thornburg International Growth vs. Dynamic International Opportun
Performance |
| Timeline |
| Thornburg International |
| Dynamic International |
Thornburg International and Dynamic International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Thornburg International and Dynamic International
The main advantage of trading using opposite Thornburg International and Dynamic International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Thornburg International position performs unexpectedly, Dynamic International 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 Dynamic International will offset losses from the drop in Dynamic International's long position.The idea behind Thornburg International Growth and Dynamic International Opportunity 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.
| Dynamic International vs. Dynamic Opportunity Fund | Dynamic International vs. Dynamic International Opportunity | Dynamic International vs. Thornburg International Growth |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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