Correlation Between Thrivent High and ALPS

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

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

Diversification Opportunities for Thrivent High and ALPS

0.29

Correlation Coefficient

Thrivent High  ALPS

Modest diversification

The 3 months correlation between Thrivent and ALPS is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Thrivent High Yield and ALPS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALPS and Thrivent High 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 Thrivent High Yield are associated (or correlated) with ALPS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ALPS has no effect on the direction of Thrivent High i.e., Thrivent High and ALPS go up and down completely randomly.

Pair Corralation between Thrivent High and ALPS

Assuming the 90 days horizon Thrivent High is expected to generate 1.76 times less return on investment than ALPS. But when comparing it to its historical volatility, Thrivent High Yield is 3.72 times less risky than ALPS. It trades about 0.11 of its potential returns per unit of risk. ALPS is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2,065  in ALPS on September 25, 2024 and sell it today you would earn a total of  523.50  from holding ALPS or generate 25.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	91.33%
Values	Daily Returns

Thrivent High Yield  vs.  ALPS

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.

ALPS

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days ALPS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly inconsistent basic indicators, ALPS showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Thrivent High and ALPS

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

The idea behind Thrivent High Yield and ALPS 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.