Correlation Between Ab Equity and Thornburg Value

Can any of the company-specific risk be diversified away by investing in both Ab Equity and Thornburg Value 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 Ab Equity and Thornburg Value into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ab Equity Income and Thornburg Value Fund, you can compare the effects of market volatilities on Ab Equity and Thornburg Value 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 Ab Equity with a short position of Thornburg Value. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ab Equity and Thornburg Value.

Diversification Opportunities for Ab Equity and Thornburg Value

0.54

Correlation Coefficient

Ab Equity  Thornburg Value

Very weak diversification

The 3 months correlation between AUIAX and Thornburg is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Ab Equity Income and Thornburg Value Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thornburg Value and Ab Equity 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 Ab Equity Income are associated (or correlated) with Thornburg Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thornburg Value has no effect on the direction of Ab Equity i.e., Ab Equity and Thornburg Value go up and down completely randomly.

Pair Corralation between Ab Equity and Thornburg Value

Assuming the 90 days horizon Ab Equity Income is expected to generate 0.65 times more return on investment than Thornburg Value. However, Ab Equity Income is 1.55 times less risky than Thornburg Value. It trades about -0.01 of its potential returns per unit of risk. Thornburg Value Fund is currently generating about -0.13 per unit of risk. If you would invest  3,251  in Ab Equity Income on December 21, 2024 and sell it today you would lose (27.00) from holding Ab Equity Income or give up 0.83% of portfolio value over 90 days.

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

Ab Equity Income  vs.  Thornburg Value Fund

Ab Equity Income

Risk-Adjusted Performance

Very Weak

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

Thornburg Value

Risk-Adjusted Performance

Very Weak

Over the last 90 days Thornburg Value Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Ab Equity and Thornburg Value

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

The idea behind Ab Equity Income and Thornburg Value Fund 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.

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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.