Correlation Between Thrivent Moderately and Smallcap World

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

By analyzing existing cross correlation between Thrivent Moderately Aggressive and Smallcap World Fund, you can compare the effects of market volatilities on Thrivent Moderately and Smallcap World 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 Thrivent Moderately with a short position of Smallcap World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Thrivent Moderately and Smallcap World.

Diversification Opportunities for Thrivent Moderately and Smallcap World

0.91

Correlation Coefficient

Thrivent Moderately  Smallcap World

Almost no diversification

The 3 months correlation between Thrivent and Smallcap is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Thrivent Moderately Aggressive and Smallcap World Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smallcap World and Thrivent Moderately 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 Thrivent Moderately Aggressive are associated (or correlated) with Smallcap World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smallcap World has no effect on the direction of Thrivent Moderately i.e., Thrivent Moderately and Smallcap World go up and down completely randomly.

Pair Corralation between Thrivent Moderately and Smallcap World

Assuming the 90 days horizon Thrivent Moderately Aggressive is expected to generate 0.71 times more return on investment than Smallcap World. However, Thrivent Moderately Aggressive is 1.42 times less risky than Smallcap World. It trades about -0.04 of its potential returns per unit of risk. Smallcap World Fund is currently generating about -0.07 per unit of risk. If you would invest  1,718  in Thrivent Moderately Aggressive on December 23, 2024 and sell it today you would lose (36.00) from holding Thrivent Moderately Aggressive or give up 2.1% of portfolio value over 90 days.

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

Thrivent Moderately Aggressive  vs.  Smallcap World Fund

Thrivent Moderately

Risk-Adjusted Performance

Very Weak

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

Smallcap World

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Thrivent Moderately and Smallcap World

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

The idea behind Thrivent Moderately Aggressive and Smallcap World Fund 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.