Correlation Between Extended Market and Thornburg
Can any of the company-specific risk be diversified away by investing in both Extended Market and Thornburg 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 Extended Market and Thornburg into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Extended Market Index and Thornburg E Growth, you can compare the effects of market volatilities on Extended Market and Thornburg 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 Extended Market with a short position of Thornburg. Check out your portfolio center. Please also check ongoing floating volatility patterns of Extended Market and Thornburg.
Diversification Opportunities for Extended Market and Thornburg
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Extended and Thornburg is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Extended Market Index 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 Extended Market 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 Extended Market Index are associated (or correlated) with Thornburg. 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 Extended Market i.e., Extended Market and Thornburg go up and down completely randomly.
Pair Corralation between Extended Market and Thornburg
Assuming the 90 days horizon Extended Market Index is expected to under-perform the Thornburg. But the mutual fund apears to be less risky and, when comparing its historical volatility, Extended Market Index is 1.47 times less risky than Thornburg. The mutual fund trades about -0.05 of its potential returns per unit of risk. The Thornburg E Growth is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 3,758 in Thornburg E Growth on September 12, 2024 and sell it today you would earn a total of 47.00 from holding Thornburg E Growth or generate 1.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Extended Market Index vs. Thornburg E Growth
Performance |
| Timeline |
| Extended Market Index |
| Thornburg E Growth |
Extended Market and Thornburg Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Extended Market and Thornburg
The main advantage of trading using opposite Extended Market and Thornburg positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Extended Market position performs unexpectedly, Thornburg 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 will offset losses from the drop in Thornburg's long position.| Extended Market vs. Vanguard Mid Cap Index | Extended Market vs. Vanguard Mid Cap Index | Extended Market vs. Vanguard Mid Cap Index | Extended Market vs. Vanguard Mid Cap Index |
| Thornburg vs. Transamerica Emerging Markets | Thornburg vs. Extended Market Index | Thornburg vs. Artisan Emerging Markets | Thornburg vs. Origin 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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