Correlation Between Tax-managed and Thornburg International

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

By analyzing existing cross correlation between Tax Managed Large Cap and Thornburg International Growth, you can compare the effects of market volatilities on Tax-managed and Thornburg International 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 Tax-managed with a short position of Thornburg International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tax-managed and Thornburg International.

Diversification Opportunities for Tax-managed and Thornburg International

-0.49

Correlation Coefficient

Tax-managed  Thornburg International

Very good diversification

The 3 months correlation between Tax-managed and Thornburg is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Tax Managed Large Cap and Thornburg International Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thornburg International and Tax-managed 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 Tax Managed Large Cap are associated (or correlated) with Thornburg International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thornburg International has no effect on the direction of Tax-managed i.e., Tax-managed and Thornburg International go up and down completely randomly.

Pair Corralation between Tax-managed and Thornburg International

Assuming the 90 days horizon Tax Managed Large Cap is expected to generate 1.23 times more return on investment than Thornburg International. However, Tax-managed is 1.23 times more volatile than Thornburg International Growth. It trades about -0.13 of its potential returns per unit of risk. Thornburg International Growth is currently generating about -0.23 per unit of risk. If you would invest  8,725  in Tax Managed Large Cap on October 11, 2024 and sell it today you would lose (214.00) from holding Tax Managed Large Cap or give up 2.45% of portfolio value over 90 days.

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

Tax Managed Large Cap  vs.  Thornburg International Growth

Tax Managed Large

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Tax Managed Large Cap are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Tax-managed is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Thornburg International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Thornburg International Growth 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 fundamental indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Tax-managed and Thornburg International

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

The idea behind Tax Managed Large Cap and Thornburg International Growth 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.