Correlation Between Smallcap Growth and Thrivent Income

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

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

Diversification Opportunities for Smallcap Growth and Thrivent Income

0.28

Correlation Coefficient

Smallcap Growth  Thrivent Income

Modest diversification

The 3 months correlation between Smallcap and Thrivent is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Smallcap Growth Fund and Thrivent Income Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thrivent Income and Smallcap Growth 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 Smallcap Growth Fund are associated (or correlated) with Thrivent Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thrivent Income has no effect on the direction of Smallcap Growth i.e., Smallcap Growth and Thrivent Income go up and down completely randomly.

Pair Corralation between Smallcap Growth and Thrivent Income

Assuming the 90 days horizon Smallcap Growth Fund is expected to under-perform the Thrivent Income. In addition to that, Smallcap Growth is 3.86 times more volatile than Thrivent Income Fund. It trades about -0.37 of its total potential returns per unit of risk. Thrivent Income Fund is currently generating about 0.22 per unit of volatility. If you would invest  808.00  in Thrivent Income Fund on December 5, 2024 and sell it today you would earn a total of  12.00  from holding Thrivent Income Fund or generate 1.49% return on investment over 90 days.

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

Smallcap Growth Fund  vs.  Thrivent Income Fund

Smallcap Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days Smallcap Growth Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Thrivent Income

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Smallcap Growth and Thrivent Income

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

The idea behind Smallcap Growth Fund and Thrivent Income 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.