Correlation Between Thrivent Small and Applied Finance

Can any of the company-specific risk be diversified away by investing in both Thrivent Small and Applied Finance 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 Applied Finance 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 Applied Finance Select, you can compare the effects of market volatilities on Thrivent Small and Applied Finance 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 Applied Finance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Thrivent Small and Applied Finance.

Diversification Opportunities for Thrivent Small and Applied Finance

0.77

Correlation Coefficient

Thrivent Small  Applied Finance

Poor diversification

The 3 months correlation between Thrivent and Applied is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Thrivent Small Cap and Applied Finance Select in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Finance Select 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 Applied Finance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Applied Finance Select has no effect on the direction of Thrivent Small i.e., Thrivent Small and Applied Finance go up and down completely randomly.

Pair Corralation between Thrivent Small and Applied Finance

Assuming the 90 days horizon Thrivent Small Cap is expected to under-perform the Applied Finance. In addition to that, Thrivent Small is 1.28 times more volatile than Applied Finance Select. It trades about -0.24 of its total potential returns per unit of risk. Applied Finance Select is currently generating about -0.1 per unit of volatility. If you would invest  2,330  in Applied Finance Select on December 2, 2024 and sell it today you would lose (112.00) from holding Applied Finance Select or give up 4.81% of portfolio value over 90 days.

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

Thrivent Small Cap  vs.  Applied Finance Select

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 weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Applied Finance Select

Risk-Adjusted Performance

Very Weak

Over the last 90 days Applied Finance Select has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong essential indicators, Applied Finance 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 Applied Finance

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

The idea behind Thrivent Small Cap and Applied Finance Select 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.