Correlation Between Thornburg Value and Thornburg Limited

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

Diversification Opportunities for Thornburg Value and Thornburg Limited

-0.32

Correlation Coefficient

Thornburg Value  Thornburg Limited

Very good diversification

The 3 months correlation between Thornburg and Thornburg is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Thornburg Value Fund and Thornburg Limited Term in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thornburg Limited Term 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 Thornburg Limited. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thornburg Limited Term has no effect on the direction of Thornburg Value i.e., Thornburg Value and Thornburg Limited go up and down completely randomly.

Pair Corralation between Thornburg Value and Thornburg Limited

Assuming the 90 days horizon Thornburg Value Fund is expected to generate 7.14 times more return on investment than Thornburg Limited. However, Thornburg Value is 7.14 times more volatile than Thornburg Limited Term. It trades about 0.08 of its potential returns per unit of risk. Thornburg Limited Term is currently generating about -0.18 per unit of risk. If you would invest  8,101  in Thornburg Value Fund on September 28, 2024 and sell it today you would earn a total of  433.00  from holding Thornburg Value Fund or generate 5.35% return on investment over 90 days.

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

Thornburg Value Fund  vs.  Thornburg Limited Term

Thornburg Value

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Thornburg Value Fund are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Thornburg Value is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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 technical and fundamental indicators, Thornburg Limited 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 Thornburg Limited

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

The idea behind Thornburg Value Fund and Thornburg Limited Term 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.