Correlation Between Royce Opportunity and Thrivent Municipal

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

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

Diversification Opportunities for Royce Opportunity and Thrivent Municipal

-0.01

Correlation Coefficient

Royce Opportunity  Thrivent Municipal

Good diversification

The 3 months correlation between ROYCE and Thrivent is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Royce Opportunity Fund and Thrivent Municipal Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thrivent Municipal Bond and Royce Opportunity 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 Royce Opportunity Fund are associated (or correlated) with Thrivent Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thrivent Municipal Bond has no effect on the direction of Royce Opportunity i.e., Royce Opportunity and Thrivent Municipal go up and down completely randomly.

Pair Corralation between Royce Opportunity and Thrivent Municipal

Assuming the 90 days horizon Royce Opportunity Fund is expected to generate 4.71 times more return on investment than Thrivent Municipal. However, Royce Opportunity is 4.71 times more volatile than Thrivent Municipal Bond. It trades about 0.16 of its potential returns per unit of risk. Thrivent Municipal Bond is currently generating about 0.07 per unit of risk. If you would invest  1,554  in Royce Opportunity Fund on September 3, 2024 and sell it today you would earn a total of  212.00  from holding Royce Opportunity Fund or generate 13.64% return on investment over 90 days.

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

Royce Opportunity Fund  vs.  Thrivent Municipal Bond

Royce Opportunity

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Royce Opportunity Fund are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Royce Opportunity showed solid returns over the last few months and may actually be approaching a breakup point.

Thrivent Municipal Bond

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Thrivent Municipal Bond are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Thrivent Municipal is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Royce Opportunity and Thrivent Municipal

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

The idea behind Royce Opportunity Fund and Thrivent Municipal Bond 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.