Correlation Between Thrivent Natural and Small Midcap

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

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

Diversification Opportunities for Thrivent Natural and Small Midcap

0.85

Correlation Coefficient

Thrivent Natural  Small Midcap

Very poor diversification

The 3 months correlation between Thrivent and Small is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Thrivent Natural Resources and Small Midcap Dividend Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Midcap Dividend and Thrivent Natural 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 Natural Resources are associated (or correlated) with Small Midcap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Midcap Dividend has no effect on the direction of Thrivent Natural i.e., Thrivent Natural and Small Midcap go up and down completely randomly.

Pair Corralation between Thrivent Natural and Small Midcap

Assuming the 90 days horizon Thrivent Natural is expected to generate 3.68 times less return on investment than Small Midcap. But when comparing it to its historical volatility, Thrivent Natural Resources is 11.65 times less risky than Small Midcap. It trades about 0.25 of its potential returns per unit of risk. Small Midcap Dividend Income is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,684  in Small Midcap Dividend Income on September 12, 2024 and sell it today you would earn a total of  325.00  from holding Small Midcap Dividend Income or generate 19.3% return on investment over 90 days.

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

Thrivent Natural Resources  vs.  Small Midcap Dividend Income

Thrivent Natural Res

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Thrivent Natural Resources are ranked lower than 18 (%) 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.

Small Midcap Dividend

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Small Midcap Dividend Income are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Small Midcap may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Thrivent Natural and Small Midcap

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

The idea behind Thrivent Natural Resources and Small Midcap Dividend Income 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.