Correlation Between Quantitative Longshort and Thornburg Value

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

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

Diversification Opportunities for Quantitative Longshort and Thornburg Value

0.61

Correlation Coefficient

Quantitative Longshort  Thornburg Value

Poor diversification

The 3 months correlation between Quantitative and Thornburg is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Quantitative Longshort Equity and Thornburg Value Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thornburg Value and Quantitative Longshort 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 Quantitative Longshort Equity 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 Quantitative Longshort i.e., Quantitative Longshort and Thornburg Value go up and down completely randomly.

Pair Corralation between Quantitative Longshort and Thornburg Value

Assuming the 90 days horizon Quantitative Longshort Equity is expected to under-perform the Thornburg Value. But the mutual fund apears to be less risky and, when comparing its historical volatility, Quantitative Longshort Equity is 1.04 times less risky than Thornburg Value. The mutual fund trades about -0.02 of its potential returns per unit of risk. The Thornburg Value Fund is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  8,217  in Thornburg Value Fund on October 26, 2024 and sell it today you would earn a total of  537.00  from holding Thornburg Value Fund or generate 6.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.33%
Values	Daily Returns

Quantitative Longshort Equity  vs.  Thornburg Value Fund

Quantitative Longshort

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Quantitative Longshort Equity has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Quantitative Longshort 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

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Thornburg Value Fund are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Thornburg Value may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Quantitative Longshort and Thornburg Value

The main advantage of trading using opposite Quantitative Longshort and Thornburg Value positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Quantitative Longshort 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 Quantitative Longshort Equity 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.

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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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.