Correlation Between Energy Basic and Thrivent Natural

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

By analyzing existing cross correlation between Energy Basic Materials and Thrivent Natural Resources, you can compare the effects of market volatilities on Energy Basic and Thrivent Natural 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 Energy Basic with a short position of Thrivent Natural. Check out your portfolio center. Please also check ongoing floating volatility patterns of Energy Basic and Thrivent Natural.

Diversification Opportunities for Energy Basic and Thrivent Natural

0.37

Correlation Coefficient

Energy Basic  Thrivent Natural

Weak diversification

The 3 months correlation between Energy and Thrivent is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Energy Basic Materials and Thrivent Natural Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thrivent Natural Res and Energy Basic 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 Energy Basic Materials are associated (or correlated) with Thrivent Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thrivent Natural Res has no effect on the direction of Energy Basic i.e., Energy Basic and Thrivent Natural go up and down completely randomly.

Pair Corralation between Energy Basic and Thrivent Natural

Assuming the 90 days horizon Energy Basic Materials is expected to under-perform the Thrivent Natural. In addition to that, Energy Basic is 14.2 times more volatile than Thrivent Natural Resources. It trades about -0.11 of its total potential returns per unit of risk. Thrivent Natural Resources is currently generating about 0.45 per unit of volatility. If you would invest  987.00  in Thrivent Natural Resources on December 4, 2024 and sell it today you would earn a total of  18.00  from holding Thrivent Natural Resources or generate 1.82% return on investment over 90 days.

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

Energy Basic Materials  vs.  Thrivent Natural Resources

Energy Basic Materials

Risk-Adjusted Performance

Very Weak

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

Thrivent Natural Res

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Thrivent Natural Resources are ranked lower than 35 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Thrivent Natural is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Energy Basic and Thrivent Natural

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

The idea behind Energy Basic Materials and Thrivent Natural Resources 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.