Correlation Between California Municipal and Thornburg Global

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

By analyzing existing cross correlation between California Municipal Portfolio and Thornburg Global Opportunities, you can compare the effects of market volatilities on California Municipal and Thornburg Global 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 California Municipal with a short position of Thornburg Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of California Municipal and Thornburg Global.

Diversification Opportunities for California Municipal and Thornburg Global

-0.02

Correlation Coefficient

California Municipal  Thornburg Global

Good diversification

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

Pair Corralation between California Municipal and Thornburg Global

Assuming the 90 days horizon California Municipal Portfolio is expected to generate 0.27 times more return on investment than Thornburg Global. However, California Municipal Portfolio is 3.73 times less risky than Thornburg Global. It trades about -0.02 of its potential returns per unit of risk. Thornburg Global Opportunities is currently generating about -0.01 per unit of risk. If you would invest  1,381  in California Municipal Portfolio on October 27, 2024 and sell it today you would lose (3.00) from holding California Municipal Portfolio or give up 0.22% of portfolio value over 90 days.

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

California Municipal Portfolio  vs.  Thornburg Global Opportunities

California Municipal

Risk-Adjusted Performance

0 of 100

Very Weak

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

Thornburg Global Opp

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with California Municipal and Thornburg Global

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

The idea behind California Municipal Portfolio and Thornburg Global Opportunities 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.