Correlation Between College Retirement and Thornburg Developing

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

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

Diversification Opportunities for College Retirement and Thornburg Developing

-0.18

Correlation Coefficient

College Retirement  Thornburg Developing

Good diversification

The 3 months correlation between College and Thornburg is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding College Retirement Equities and Thornburg Developing World in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thornburg Developing and College Retirement 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 College Retirement Equities are associated (or correlated) with Thornburg Developing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thornburg Developing has no effect on the direction of College Retirement i.e., College Retirement and Thornburg Developing go up and down completely randomly.

Pair Corralation between College Retirement and Thornburg Developing

Assuming the 90 days trading horizon College Retirement Equities is expected to generate 0.88 times more return on investment than Thornburg Developing. However, College Retirement Equities is 1.13 times less risky than Thornburg Developing. It trades about 0.18 of its potential returns per unit of risk. Thornburg Developing World is currently generating about 0.08 per unit of risk. If you would invest  48,092  in College Retirement Equities on September 16, 2024 and sell it today you would earn a total of  3,975  from holding College Retirement Equities or generate 8.27% return on investment over 90 days.

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

College Retirement Equities  vs.  Thornburg Developing World

College Retirement

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in College Retirement Equities are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly unfluctuating technical and fundamental indicators, College Retirement may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Thornburg Developing

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Thornburg Developing World are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Thornburg Developing is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with College Retirement and Thornburg Developing

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

The idea behind College Retirement Equities and Thornburg Developing World 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.