Correlation Between Thrivent Small and Thrivent Balanced

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

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

Diversification Opportunities for Thrivent Small and Thrivent Balanced

0.69

Correlation Coefficient

Thrivent Small  Thrivent Balanced

Poor diversification

The 3 months correlation between Thrivent and Thrivent is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Thrivent Small Cap and Thrivent Balanced Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thrivent Balanced Income and Thrivent Small 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 Small Cap are associated (or correlated) with Thrivent Balanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thrivent Balanced Income has no effect on the direction of Thrivent Small i.e., Thrivent Small and Thrivent Balanced go up and down completely randomly.

Pair Corralation between Thrivent Small and Thrivent Balanced

Assuming the 90 days horizon Thrivent Small Cap is expected to under-perform the Thrivent Balanced. In addition to that, Thrivent Small is 2.23 times more volatile than Thrivent Balanced Income. It trades about -0.17 of its total potential returns per unit of risk. Thrivent Balanced Income is currently generating about -0.08 per unit of volatility. If you would invest  1,425  in Thrivent Balanced Income on November 29, 2024 and sell it today you would lose (32.00) from holding Thrivent Balanced Income or give up 2.25% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.33%
Values	Daily Returns

Thrivent Small Cap  vs.  Thrivent Balanced Income

Thrivent Small Cap

Risk-Adjusted Performance

Very Weak

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

Thrivent Balanced Income

Risk-Adjusted Performance

Very Weak

Over the last 90 days Thrivent Balanced Income has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Thrivent Balanced 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 Small and Thrivent Balanced

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

The idea behind Thrivent Small Cap and Thrivent Balanced 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.

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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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.