Correlation Between California Bond and Thrivent Income

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

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

Diversification Opportunities for California Bond and Thrivent Income

0.62

Correlation Coefficient

California Bond  Thrivent Income

Poor diversification

The 3 months correlation between California and THRIVENT is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding California Bond Fund and Thrivent Income Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thrivent Income and California Bond 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 California Bond Fund are associated (or correlated) with Thrivent Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thrivent Income has no effect on the direction of California Bond i.e., California Bond and Thrivent Income go up and down completely randomly.

Pair Corralation between California Bond and Thrivent Income

Assuming the 90 days horizon California Bond is expected to generate 1.41 times less return on investment than Thrivent Income. But when comparing it to its historical volatility, California Bond Fund is 1.55 times less risky than Thrivent Income. It trades about 0.07 of its potential returns per unit of risk. Thrivent Income Fund is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  745.00  in Thrivent Income Fund on August 31, 2024 and sell it today you would earn a total of  78.00  from holding Thrivent Income Fund or generate 10.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.73%
Values	Daily Returns

California Bond Fund  vs.  Thrivent Income Fund

California Bond

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in California Bond Fund are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental drivers, California Bond is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Thrivent Income

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with California Bond and Thrivent Income

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

The idea behind California Bond Fund and Thrivent Income 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.