Correlation Between Us Small and Thrivent Government

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

By analyzing existing cross correlation between Us Small Cap and Thrivent Government Bond, you can compare the effects of market volatilities on Us Small and Thrivent Government 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 Us Small with a short position of Thrivent Government. Check out your portfolio center. Please also check ongoing floating volatility patterns of Us Small and Thrivent Government.

Diversification Opportunities for Us Small and Thrivent Government

-0.74

Correlation Coefficient

Us Small  Thrivent Government

Pay attention - limited upside

The 3 months correlation between RLESX and Thrivent is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Us Small Cap and Thrivent Government Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thrivent Government Bond and Us Small 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 Us Small Cap are associated (or correlated) with Thrivent Government. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thrivent Government Bond has no effect on the direction of Us Small i.e., Us Small and Thrivent Government go up and down completely randomly.

Pair Corralation between Us Small and Thrivent Government

Assuming the 90 days horizon Us Small Cap is expected to under-perform the Thrivent Government. In addition to that, Us Small is 3.86 times more volatile than Thrivent Government Bond. It trades about -0.08 of its total potential returns per unit of risk. Thrivent Government Bond is currently generating about 0.13 per unit of volatility. If you would invest  859.00  in Thrivent Government Bond on December 29, 2024 and sell it today you would earn a total of  22.00  from holding Thrivent Government Bond or generate 2.56% return on investment over 90 days.

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

Us Small Cap  vs.  Thrivent Government Bond

Us Small Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Us Small Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Thrivent Government Bond

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Thrivent Government Bond are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Thrivent Government is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Us Small and Thrivent Government

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

The idea behind Us Small Cap and Thrivent Government Bond 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.

Check out your portfolio center.

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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.