Correlation Between Thornburg Strategic and Thornburg Investment

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

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

Diversification Opportunities for Thornburg Strategic and Thornburg Investment

0.56

Correlation Coefficient

Thornburg Strategic  Thornburg Investment

Very weak diversification

The 3 months correlation between Thornburg and Thornburg is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Thornburg Strategic Income and Thornburg Investment Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thornburg Investment and Thornburg Strategic 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 Strategic Income are associated (or correlated) with Thornburg Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thornburg Investment has no effect on the direction of Thornburg Strategic i.e., Thornburg Strategic and Thornburg Investment go up and down completely randomly.

Pair Corralation between Thornburg Strategic and Thornburg Investment

Assuming the 90 days horizon Thornburg Strategic Income is expected to generate 0.38 times more return on investment than Thornburg Investment. However, Thornburg Strategic Income is 2.64 times less risky than Thornburg Investment. It trades about -0.09 of its potential returns per unit of risk. Thornburg Investment Income is currently generating about -0.07 per unit of risk. If you would invest  1,159  in Thornburg Strategic Income on September 15, 2024 and sell it today you would lose (12.00) from holding Thornburg Strategic Income or give up 1.04% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Thornburg Strategic Income  vs.  Thornburg Investment Income

Thornburg Strategic

Risk-Adjusted Performance

0 of 100

Very Weak

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

Thornburg Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Thornburg Investment Income has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Thornburg Investment 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 Strategic and Thornburg Investment

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

The idea behind Thornburg Strategic Income and Thornburg Investment 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.