Correlation Between Thrivent High and Capital Income

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

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

Diversification Opportunities for Thrivent High and Capital Income

0.87

Correlation Coefficient

Thrivent High  Capital Income

Very poor diversification

The 3 months correlation between Thrivent and Capital is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Thrivent High Yield and Capital Income Builder in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Income Builder and Thrivent High 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 Thrivent High Yield are associated (or correlated) with Capital Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Income Builder has no effect on the direction of Thrivent High i.e., Thrivent High and Capital Income go up and down completely randomly.

Pair Corralation between Thrivent High and Capital Income

Assuming the 90 days horizon Thrivent High is expected to generate 1.22 times less return on investment than Capital Income. But when comparing it to its historical volatility, Thrivent High Yield is 1.65 times less risky than Capital Income. It trades about 0.12 of its potential returns per unit of risk. Capital Income Builder is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  6,001  in Capital Income Builder on March 8, 2024 and sell it today you would earn a total of  866.00  from holding Capital Income Builder or generate 14.43% return on investment over 90 days.

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

Thrivent High Yield  vs.  Capital Income Builder

Thrivent High Yield

Risk-Adjusted Performance

5 of 100

Modest

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

Capital Income Builder

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Capital Income Builder are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Capital 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 Thrivent High and Capital Income

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

The idea behind Thrivent High Yield and Capital Income Builder 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.