Correlation Between Thornburg Developing and Energy Basic

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

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

Diversification Opportunities for Thornburg Developing and Energy Basic

0.49

Correlation Coefficient

Thornburg Developing  Energy Basic

Very weak diversification

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

Pair Corralation between Thornburg Developing and Energy Basic

Assuming the 90 days horizon Thornburg Developing World is expected to under-perform the Energy Basic. In addition to that, Thornburg Developing is 1.43 times more volatile than Energy Basic Materials. It trades about -0.11 of its total potential returns per unit of risk. Energy Basic Materials is currently generating about 0.83 per unit of volatility. If you would invest  1,144  in Energy Basic Materials on October 22, 2024 and sell it today you would earn a total of  89.00  from holding Energy Basic Materials or generate 7.78% return on investment over 90 days.

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

Thornburg Developing World  vs.  Energy Basic Materials

Thornburg Developing

Risk-Adjusted Performance

0 of 100

Very Weak

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

Energy Basic Materials

Risk-Adjusted Performance

0 of 100

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 fairly strong fundamental drivers, Energy Basic is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Thornburg Developing and Energy Basic

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

The idea behind Thornburg Developing World and Energy Basic Materials 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.