Correlation Between Absolute Convertible and Thrivent Moderately

Can any of the company-specific risk be diversified away by investing in both Absolute Convertible and Thrivent Moderately 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 Absolute Convertible and Thrivent Moderately into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Absolute Convertible Arbitrage and Thrivent Moderately Servative, you can compare the effects of market volatilities on Absolute Convertible and Thrivent Moderately 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 Absolute Convertible with a short position of Thrivent Moderately. Check out your portfolio center. Please also check ongoing floating volatility patterns of Absolute Convertible and Thrivent Moderately.

Diversification Opportunities for Absolute Convertible and Thrivent Moderately

0.76

Correlation Coefficient

Absolute Convertible  Thrivent Moderately

Poor diversification

The 3 months correlation between Absolute and Thrivent is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Absolute Convertible Arbitrage and Thrivent Moderately Servative in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thrivent Moderately and Absolute Convertible 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 Absolute Convertible Arbitrage are associated (or correlated) with Thrivent Moderately. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thrivent Moderately has no effect on the direction of Absolute Convertible i.e., Absolute Convertible and Thrivent Moderately go up and down completely randomly.

Pair Corralation between Absolute Convertible and Thrivent Moderately

Assuming the 90 days horizon Absolute Convertible Arbitrage is expected to under-perform the Thrivent Moderately. But the mutual fund apears to be less risky and, when comparing its historical volatility, Absolute Convertible Arbitrage is 1.37 times less risky than Thrivent Moderately. The mutual fund trades about -0.17 of its potential returns per unit of risk. The Thrivent Moderately Servative is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  1,319  in Thrivent Moderately Servative on October 6, 2024 and sell it today you would lose (21.00) from holding Thrivent Moderately Servative or give up 1.59% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Absolute Convertible Arbitrage  vs.  Thrivent Moderately Servative

Absolute Convertible

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Absolute Convertible Arbitrage has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Absolute Convertible is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Thrivent Moderately

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Thrivent Moderately Servative has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Thrivent Moderately is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Absolute Convertible and Thrivent Moderately

The main advantage of trading using opposite Absolute Convertible and Thrivent Moderately positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Absolute Convertible position performs unexpectedly, Thrivent Moderately 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 Thrivent Moderately will offset losses from the drop in Thrivent Moderately's long position.

The idea behind Absolute Convertible Arbitrage and Thrivent Moderately Servative 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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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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.