Correlation Between Technology Ultrasector and Thornburg Core

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

By analyzing existing cross correlation between Technology Ultrasector Profund and Thornburg E Growth, you can compare the effects of market volatilities on Technology Ultrasector and Thornburg Core 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 Technology Ultrasector with a short position of Thornburg Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of Technology Ultrasector and Thornburg Core.

Diversification Opportunities for Technology Ultrasector and Thornburg Core

0.89

Correlation Coefficient

Technology Ultrasector  Thornburg Core

Very poor diversification

The 3 months correlation between Technology and Thornburg is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Technology Ultrasector Profund and Thornburg E Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thornburg E Growth and Technology Ultrasector 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 Technology Ultrasector Profund are associated (or correlated) with Thornburg Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thornburg E Growth has no effect on the direction of Technology Ultrasector i.e., Technology Ultrasector and Thornburg Core go up and down completely randomly.

Pair Corralation between Technology Ultrasector and Thornburg Core

Assuming the 90 days horizon Technology Ultrasector is expected to generate 1.2 times less return on investment than Thornburg Core. In addition to that, Technology Ultrasector is 1.1 times more volatile than Thornburg E Growth. It trades about 0.24 of its total potential returns per unit of risk. Thornburg E Growth is currently generating about 0.32 per unit of volatility. If you would invest  3,478  in Thornburg E Growth on September 4, 2024 and sell it today you would earn a total of  355.00  from holding Thornburg E Growth or generate 10.21% return on investment over 90 days.

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

Technology Ultrasector Profund  vs.  Thornburg E Growth

Technology Ultrasector

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Technology Ultrasector Profund are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Technology Ultrasector showed solid returns over the last few months and may actually be approaching a breakup point.

Thornburg E Growth

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Thornburg E Growth are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Thornburg Core showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Technology Ultrasector and Thornburg Core

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

The idea behind Technology Ultrasector Profund and Thornburg E Growth 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.