Correlation Between Thornburg International and Thornburg Value

Can any of the company-specific risk be diversified away by investing in both Thornburg International and Thornburg Value 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 Value 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 Value Fund, you can compare the effects of market volatilities on Thornburg International and Thornburg Value 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 Value. Check out your portfolio center. Please also check ongoing floating volatility patterns of Thornburg International and Thornburg Value.

Diversification Opportunities for Thornburg International and Thornburg Value

-0.61

Correlation Coefficient

Thornburg International  Thornburg Value

Excellent diversification

The 3 months correlation between Thornburg and Thornburg is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Thornburg International Value and Thornburg Value Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thornburg Value 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 Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thornburg Value has no effect on the direction of Thornburg International i.e., Thornburg International and Thornburg Value go up and down completely randomly.

Pair Corralation between Thornburg International and Thornburg Value

Assuming the 90 days horizon Thornburg International Value is expected to under-perform the Thornburg Value. But the mutual fund apears to be less risky and, when comparing its historical volatility, Thornburg International Value is 1.11 times less risky than Thornburg Value. The mutual fund trades about -0.11 of its potential returns per unit of risk. The Thornburg Value Fund is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  7,727  in Thornburg Value Fund on September 2, 2024 and sell it today you would earn a total of  1,228  from holding Thornburg Value Fund or generate 15.89% return on investment over 90 days.

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

Thornburg International Value  vs.  Thornburg Value Fund

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 latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Thornburg Value

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Thornburg Value Fund are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Thornburg Value showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Thornburg International and Thornburg Value

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

The idea behind Thornburg International Value and Thornburg Value Fund 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.