Correlation Between Small Cap and Thornburg Core
Can any of the company-specific risk be diversified away by investing in both Small Cap and Thornburg Core 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 Small Cap and Thornburg Core into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Small Cap Stock and Thornburg E Growth, you can compare the effects of market volatilities on Small Cap and Thornburg Core 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 Small Cap with a short position of Thornburg Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Thornburg Core.
Diversification Opportunities for Small Cap and Thornburg Core
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Small and Thornburg is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Stock and Thornburg E Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thornburg E Growth and Small Cap 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 Small Cap Stock are associated (or correlated) with Thornburg Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thornburg E Growth has no effect on the direction of Small Cap i.e., Small Cap and Thornburg Core go up and down completely randomly.
Pair Corralation between Small Cap and Thornburg Core
Assuming the 90 days horizon Small Cap Stock is expected to generate 1.11 times more return on investment than Thornburg Core. However, Small Cap is 1.11 times more volatile than Thornburg E Growth. It trades about 0.08 of its potential returns per unit of risk. Thornburg E Growth is currently generating about 0.09 per unit of risk. If you would invest 1,346 in Small Cap Stock on August 29, 2024 and sell it today you would earn a total of 192.00 from holding Small Cap Stock or generate 14.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Small Cap Stock vs. Thornburg E Growth
Performance |
| Timeline |
| Small Cap Stock |
| Thornburg E Growth |
Small Cap and Thornburg Core Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Cap and Thornburg Core
The main advantage of trading using opposite Small Cap and Thornburg Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap position performs unexpectedly, Thornburg Core 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 Core will offset losses from the drop in Thornburg Core's long position.| Small Cap vs. Franklin Adjustable Government | Small Cap vs. Dreyfus Government Cash | Small Cap vs. Lord Abbett Government | Small Cap vs. Inverse Government Long |
| Thornburg Core vs. Pgim Conservative Retirement | Thornburg Core vs. Dimensional Retirement Income | Thornburg Core vs. Qs Moderate Growth | Thornburg Core vs. Lifestyle Ii Moderate |
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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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