Correlation Between Quantitative Longshort and Fairholme Focused
Can any of the company-specific risk be diversified away by investing in both Quantitative Longshort and Fairholme Focused 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 Quantitative Longshort and Fairholme Focused into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Quantitative Longshort Equity and The Fairholme Focused, you can compare the effects of market volatilities on Quantitative Longshort and Fairholme Focused 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 Quantitative Longshort with a short position of Fairholme Focused. Check out your portfolio center. Please also check ongoing floating volatility patterns of Quantitative Longshort and Fairholme Focused.
Diversification Opportunities for Quantitative Longshort and Fairholme Focused
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Quantitative and Fairholme is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Quantitative Longshort Equity and The Fairholme Focused in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fairholme Focused and Quantitative Longshort 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 Quantitative Longshort Equity are associated (or correlated) with Fairholme Focused. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fairholme Focused has no effect on the direction of Quantitative Longshort i.e., Quantitative Longshort and Fairholme Focused go up and down completely randomly.
Pair Corralation between Quantitative Longshort and Fairholme Focused
Assuming the 90 days horizon Quantitative Longshort is expected to generate 3.09 times less return on investment than Fairholme Focused. But when comparing it to its historical volatility, Quantitative Longshort Equity is 1.57 times less risky than Fairholme Focused. It trades about 0.12 of its potential returns per unit of risk. The Fairholme Focused is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 1,376 in The Fairholme Focused on September 13, 2024 and sell it today you would earn a total of 32.00 from holding The Fairholme Focused or generate 2.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Quantitative Longshort Equity vs. The Fairholme Focused
Performance |
| Timeline |
| Quantitative Longshort |
| Fairholme Focused |
Quantitative Longshort and Fairholme Focused Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Quantitative Longshort and Fairholme Focused
The main advantage of trading using opposite Quantitative Longshort and Fairholme Focused positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Quantitative Longshort position performs unexpectedly, Fairholme Focused 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 Fairholme Focused will offset losses from the drop in Fairholme Focused's long position.The idea behind Quantitative Longshort Equity and The Fairholme Focused 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.
| Fairholme Focused vs. The Fairholme Fund | Fairholme Focused vs. Fidelity Magellan Fund | Fairholme Focused vs. Fidelity Telecom And | Fairholme Focused vs. Equity Growth 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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