Correlation Between Intermediate Term and Thornburg Value

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

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

Diversification Opportunities for Intermediate Term and Thornburg Value

-0.79

Correlation Coefficient

Intermediate Term  Thornburg Value

Pay attention - limited upside

The 3 months correlation between Intermediate and Thornburg is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Intermediate Term Bond Fund and Thornburg Value Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thornburg Value and Intermediate Term 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 Intermediate Term Bond Fund are associated (or correlated) with Thornburg Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thornburg Value has no effect on the direction of Intermediate Term i.e., Intermediate Term and Thornburg Value go up and down completely randomly.

Pair Corralation between Intermediate Term and Thornburg Value

Assuming the 90 days horizon Intermediate Term Bond Fund is expected to generate 0.22 times more return on investment than Thornburg Value. However, Intermediate Term Bond Fund is 4.53 times less risky than Thornburg Value. It trades about 0.14 of its potential returns per unit of risk. Thornburg Value Fund is currently generating about -0.12 per unit of risk. If you would invest  894.00  in Intermediate Term Bond Fund on December 27, 2024 and sell it today you would earn a total of  22.00  from holding Intermediate Term Bond Fund or generate 2.46% return on investment over 90 days.

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

Intermediate Term Bond Fund  vs.  Thornburg Value Fund

Intermediate Term Bond

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Intermediate Term Bond Fund are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental drivers, Intermediate Term is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Thornburg Value

Risk-Adjusted Performance

Very Weak

Over the last 90 days Thornburg Value Fund 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.

Pair Trading with Intermediate Term and Thornburg Value

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

The idea behind Intermediate Term Bond Fund and Thornburg Value 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.