Correlation Between Thrivent High and IShares MSCI

Can any of the company-specific risk be diversified away by investing in both Thrivent High and IShares MSCI 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 IShares MSCI 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 iShares MSCI USA, you can compare the effects of market volatilities on Thrivent High and IShares MSCI 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 IShares MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Thrivent High and IShares MSCI.

Diversification Opportunities for Thrivent High and IShares MSCI

0.09

Correlation Coefficient

Thrivent High  IShares MSCI

Significant diversification

The 3 months correlation between Thrivent and IShares is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Thrivent High Yield and iShares MSCI USA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI USA 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 IShares MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares MSCI USA has no effect on the direction of Thrivent High i.e., Thrivent High and IShares MSCI go up and down completely randomly.

Pair Corralation between Thrivent High and IShares MSCI

Assuming the 90 days horizon Thrivent High Yield is expected to generate 0.24 times more return on investment than IShares MSCI. However, Thrivent High Yield is 4.2 times less risky than IShares MSCI. It trades about 0.09 of its potential returns per unit of risk. iShares MSCI USA is currently generating about -0.08 per unit of risk. If you would invest  414.00  in Thrivent High Yield on December 30, 2024 and sell it today you would earn a total of  5.00  from holding Thrivent High Yield or generate 1.21% return on investment over 90 days.

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

Thrivent High Yield  vs.  iShares MSCI USA

Thrivent High Yield

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Thrivent High Yield are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. 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.

iShares MSCI USA

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares MSCI USA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, IShares MSCI is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Thrivent High and IShares MSCI

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

The idea behind Thrivent High Yield and iShares MSCI USA 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.