Correlation Between Thrivent High and Royce Micro

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

Diversification Opportunities for Thrivent High and Royce Micro

0.65

Correlation Coefficient

Thrivent High  Royce Micro

Poor diversification

The 3 months correlation between Thrivent and Royce is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Thrivent High Yield and Royce Micro Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Royce Micro Cap 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 Royce Micro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Royce Micro Cap has no effect on the direction of Thrivent High i.e., Thrivent High and Royce Micro go up and down completely randomly.

Pair Corralation between Thrivent High and Royce Micro

Assuming the 90 days horizon Thrivent High is expected to generate 2.69 times less return on investment than Royce Micro. But when comparing it to its historical volatility, Thrivent High Yield is 4.44 times less risky than Royce Micro. It trades about 0.12 of its potential returns per unit of risk. Royce Micro Cap is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  695.00  in Royce Micro Cap on September 25, 2024 and sell it today you would earn a total of  270.00  from holding Royce Micro Cap or generate 38.85% return on investment over 90 days.

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

Thrivent High Yield  vs.  Royce Micro Cap

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.

Royce Micro Cap

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Royce Micro Cap are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable primary indicators, Royce Micro is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Thrivent High and Royce Micro

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

The idea behind Thrivent High Yield and Royce Micro Cap 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.