Correlation Between Great Elm and Thrivent High

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

By analyzing existing cross correlation between Great Elm Capital and Thrivent High Yield, you can compare the effects of market volatilities on Great Elm and Thrivent High 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 Great Elm with a short position of Thrivent High. Check out your portfolio center. Please also check ongoing floating volatility patterns of Great Elm and Thrivent High.

Diversification Opportunities for Great Elm and Thrivent High

-0.04

Correlation Coefficient

Great Elm  Thrivent High

Good diversification

The 3 months correlation between Great and Thrivent is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Great Elm Capital and Thrivent High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thrivent High Yield and Great Elm 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 Great Elm Capital are associated (or correlated) with Thrivent High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thrivent High Yield has no effect on the direction of Great Elm i.e., Great Elm and Thrivent High go up and down completely randomly.

Pair Corralation between Great Elm and Thrivent High

Assuming the 90 days horizon Great Elm Capital is expected to generate 2.05 times more return on investment than Thrivent High. However, Great Elm is 2.05 times more volatile than Thrivent High Yield. It trades about 0.24 of its potential returns per unit of risk. Thrivent High Yield is currently generating about -0.1 per unit of risk. If you would invest  2,444  in Great Elm Capital on September 21, 2024 and sell it today you would earn a total of  53.00  from holding Great Elm Capital or generate 2.17% return on investment over 90 days.

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

Great Elm Capital  vs.  Thrivent High Yield

Great Elm Capital

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Great Elm Capital are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Great Elm is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Thrivent High Yield

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Great Elm and Thrivent High

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

The idea behind Great Elm Capital and Thrivent High Yield 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.