Correlation Between Rational Strategic and Thornburg Developing

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

By analyzing existing cross correlation between Rational Strategic Allocation and Thornburg Developing World, you can compare the effects of market volatilities on Rational Strategic and Thornburg Developing 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 Rational Strategic with a short position of Thornburg Developing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rational Strategic and Thornburg Developing.

Diversification Opportunities for Rational Strategic and Thornburg Developing

-0.02

Correlation Coefficient

Rational Strategic  Thornburg Developing

Good diversification

The 3 months correlation between Rational and Thornburg is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Rational Strategic Allocation and Thornburg Developing World in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thornburg Developing and Rational Strategic 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 Rational Strategic Allocation are associated (or correlated) with Thornburg Developing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thornburg Developing has no effect on the direction of Rational Strategic i.e., Rational Strategic and Thornburg Developing go up and down completely randomly.

Pair Corralation between Rational Strategic and Thornburg Developing

Assuming the 90 days horizon Rational Strategic Allocation is expected to under-perform the Thornburg Developing. In addition to that, Rational Strategic is 2.11 times more volatile than Thornburg Developing World. It trades about -0.12 of its total potential returns per unit of risk. Thornburg Developing World is currently generating about 0.04 per unit of volatility. If you would invest  2,142  in Thornburg Developing World on December 22, 2024 and sell it today you would earn a total of  44.00  from holding Thornburg Developing World or generate 2.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Rational Strategic Allocation  vs.  Thornburg Developing World

Rational Strategic

Risk-Adjusted Performance

Very Weak

Over the last 90 days Rational Strategic Allocation 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.

Thornburg Developing

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Thornburg Developing World are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Thornburg Developing is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Rational Strategic and Thornburg Developing

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

The idea behind Rational Strategic Allocation and Thornburg Developing World 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.