Correlation Between The Fairholme and Third Avenue
Can any of the company-specific risk be diversified away by investing in both The Fairholme and Third Avenue 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 The Fairholme and Third Avenue into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Fairholme Fund and Third Avenue Small Cap, you can compare the effects of market volatilities on The Fairholme and Third Avenue 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 The Fairholme with a short position of Third Avenue. Check out your portfolio center. Please also check ongoing floating volatility patterns of The Fairholme and Third Avenue.
Diversification Opportunities for The Fairholme and Third Avenue
-0.21 | Correlation Coefficient |
Very good diversification
The 3 months correlation between The and Third is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding The Fairholme Fund and Third Avenue Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Third Avenue Small and The Fairholme 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 The Fairholme Fund are associated (or correlated) with Third Avenue. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Third Avenue Small has no effect on the direction of The Fairholme i.e., The Fairholme and Third Avenue go up and down completely randomly.
Pair Corralation between The Fairholme and Third Avenue
Assuming the 90 days horizon The Fairholme Fund is expected to under-perform the Third Avenue. In addition to that, The Fairholme is 1.22 times more volatile than Third Avenue Small Cap. It trades about -0.02 of its total potential returns per unit of risk. Third Avenue Small Cap is currently generating about 0.01 per unit of volatility. If you would invest 2,177 in Third Avenue Small Cap on August 26, 2024 and sell it today you would earn a total of 62.00 from holding Third Avenue Small Cap or generate 2.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Fairholme Fund vs. Third Avenue Small Cap
Performance |
| Timeline |
| The Fairholme |
| Third Avenue Small |
The Fairholme and Third Avenue Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with The Fairholme and Third Avenue
The main advantage of trading using opposite The Fairholme and Third Avenue positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if The Fairholme position performs unexpectedly, Third Avenue 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 Third Avenue will offset losses from the drop in Third Avenue's long position.| The Fairholme vs. The Fairholme Focused | The Fairholme vs. Vanguard Wellington Fund | The Fairholme vs. Vanguard Materials Index | The Fairholme vs. Vanguard Target Retirement |
| Third Avenue vs. Third Avenue Value | Third Avenue vs. Third Avenue Real | Third Avenue vs. Muhlenkamp Fund Institutional | Third Avenue vs. Longleaf Partners Fund |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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