Correlation Between Thornburg Limited and Thornburg Strategic

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

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

Diversification Opportunities for Thornburg Limited and Thornburg Strategic

0.9

Correlation Coefficient

Thornburg Limited  Thornburg Strategic

Almost no diversification

The 3 months correlation between Thornburg and Thornburg is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Thornburg Limited Term and Thornburg Strategic Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thornburg Strategic and Thornburg Limited 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 Limited Term are associated (or correlated) with Thornburg Strategic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thornburg Strategic has no effect on the direction of Thornburg Limited i.e., Thornburg Limited and Thornburg Strategic go up and down completely randomly.

Pair Corralation between Thornburg Limited and Thornburg Strategic

Assuming the 90 days horizon Thornburg Limited Term is expected to generate 0.97 times more return on investment than Thornburg Strategic. However, Thornburg Limited Term is 1.03 times less risky than Thornburg Strategic. It trades about -0.02 of its potential returns per unit of risk. Thornburg Strategic Income is currently generating about -0.07 per unit of risk. If you would invest  1,303  in Thornburg Limited Term on September 13, 2024 and sell it today you would lose (3.00) from holding Thornburg Limited Term or give up 0.23% of portfolio value over 90 days.

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

Thornburg Limited Term  vs.  Thornburg Strategic Income

Thornburg Limited Term

Risk-Adjusted Performance

0 of 100

Very Weak

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

Thornburg Strategic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Thornburg Strategic Income has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Thornburg Strategic 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 Limited and Thornburg Strategic

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

The idea behind Thornburg Limited Term and Thornburg Strategic 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.