Correlation Between Thornburg International and Thornburg Investment

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

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

Diversification Opportunities for Thornburg International and Thornburg Investment

0.87

Correlation Coefficient

Thornburg International  Thornburg Investment

Very poor diversification

The 3 months correlation between Thornburg and Thornburg is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Thornburg International Value and Thornburg Investment Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thornburg Investment and Thornburg International 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 Thornburg International Value are associated (or correlated) with Thornburg Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thornburg Investment has no effect on the direction of Thornburg International i.e., Thornburg International and Thornburg Investment go up and down completely randomly.

Pair Corralation between Thornburg International and Thornburg Investment

Assuming the 90 days horizon Thornburg International Value is expected to under-perform the Thornburg Investment. In addition to that, Thornburg International is 1.83 times more volatile than Thornburg Investment Income. It trades about -0.24 of its total potential returns per unit of risk. Thornburg Investment Income is currently generating about -0.09 per unit of volatility. If you would invest  2,644  in Thornburg Investment Income on September 30, 2024 and sell it today you would lose (76.00) from holding Thornburg Investment Income or give up 2.87% of portfolio value over 90 days.

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

Thornburg International Value  vs.  Thornburg Investment Income

Thornburg International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Thornburg International Value has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Thornburg Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Thornburg Investment Income has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Thornburg Investment is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Thornburg International and Thornburg Investment

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

The idea behind Thornburg International Value and Thornburg Investment Income 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.