Correlation Between Thornburg Intermediate and Sarofim Equity

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

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

Diversification Opportunities for Thornburg Intermediate and Sarofim Equity

0.21

Correlation Coefficient

Thornburg Intermediate  Sarofim Equity

Modest diversification

The 3 months correlation between Thornburg and Sarofim is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Thornburg Intermediate Municip and Sarofim Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sarofim Equity and Thornburg Intermediate 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 Intermediate Municipal are associated (or correlated) with Sarofim Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sarofim Equity has no effect on the direction of Thornburg Intermediate i.e., Thornburg Intermediate and Sarofim Equity go up and down completely randomly.

Pair Corralation between Thornburg Intermediate and Sarofim Equity

Assuming the 90 days horizon Thornburg Intermediate is expected to generate 8.12 times less return on investment than Sarofim Equity. But when comparing it to its historical volatility, Thornburg Intermediate Municipal is 3.13 times less risky than Sarofim Equity. It trades about 0.04 of its potential returns per unit of risk. Sarofim Equity is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,665  in Sarofim Equity on September 12, 2024 and sell it today you would earn a total of  62.00  from holding Sarofim Equity or generate 3.72% return on investment over 90 days.

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

Thornburg Intermediate Municip  vs.  Sarofim Equity

Thornburg Intermediate

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Thornburg Intermediate Municipal are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Thornburg Intermediate is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Sarofim Equity

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sarofim Equity are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong primary indicators, Sarofim Equity 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 Intermediate and Sarofim Equity

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

The idea behind Thornburg Intermediate Municipal and Sarofim Equity 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.