Correlation Between Thornburg Value and North Star

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

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

Diversification Opportunities for Thornburg Value and North Star

0.92

Correlation Coefficient

Thornburg Value  North Star

Almost no diversification

The 3 months correlation between Thornburg and North is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Thornburg Value Fund and North Star Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on North Star Dividend and Thornburg Value 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 Value Fund are associated (or correlated) with North Star. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of North Star Dividend has no effect on the direction of Thornburg Value i.e., Thornburg Value and North Star go up and down completely randomly.

Pair Corralation between Thornburg Value and North Star

Assuming the 90 days horizon Thornburg Value Fund is expected to generate 1.1 times more return on investment than North Star. However, Thornburg Value is 1.1 times more volatile than North Star Dividend. It trades about 0.12 of its potential returns per unit of risk. North Star Dividend is currently generating about 0.03 per unit of risk. If you would invest  7,726  in Thornburg Value Fund on September 19, 2024 and sell it today you would earn a total of  587.00  from holding Thornburg Value Fund or generate 7.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.44%
Values	Daily Returns

Thornburg Value Fund  vs.  North Star Dividend

Thornburg Value

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Thornburg Value Fund are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Thornburg Value may actually be approaching a critical reversion point that can send shares even higher in January 2025.

North Star Dividend

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in North Star Dividend are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, North Star 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 Value and North Star

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

The idea behind Thornburg Value Fund and North Star Dividend 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.

Check out your portfolio center.

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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.