Correlation Between Pear Tree and Thornburg International
Can any of the company-specific risk be diversified away by investing in both Pear Tree and Thornburg International 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 Pear Tree and Thornburg International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pear Tree Polaris and Thornburg International Value, you can compare the effects of market volatilities on Pear Tree and Thornburg International 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 Pear Tree with a short position of Thornburg International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pear Tree and Thornburg International.
Diversification Opportunities for Pear Tree and Thornburg International
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Pear and Thornburg is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Pear Tree Polaris and Thornburg International Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thornburg International and Pear Tree 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 Pear Tree Polaris are associated (or correlated) with Thornburg International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thornburg International has no effect on the direction of Pear Tree i.e., Pear Tree and Thornburg International go up and down completely randomly.
Pair Corralation between Pear Tree and Thornburg International
Assuming the 90 days horizon Pear Tree Polaris is expected to generate 0.75 times more return on investment than Thornburg International. However, Pear Tree Polaris is 1.34 times less risky than Thornburg International. It trades about -0.24 of its potential returns per unit of risk. Thornburg International Value is currently generating about -0.2 per unit of risk. If you would invest 2,506 in Pear Tree Polaris on September 25, 2024 and sell it today you would lose (267.00) from holding Pear Tree Polaris or give up 10.65% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Pear Tree Polaris vs. Thornburg International Value
Performance |
Timeline |
Pear Tree Polaris |
Thornburg International |
Pear Tree and Thornburg International Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Pear Tree and Thornburg International
The main advantage of trading using opposite Pear Tree and Thornburg International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pear Tree position performs unexpectedly, Thornburg International 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 International will offset losses from the drop in Thornburg International's long position.Pear Tree vs. Pear Tree Essex | Pear Tree vs. Essex Environmental Opportunities | Pear Tree vs. Pear Tree Quality | Pear Tree vs. Pear Tree Polaris |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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