Correlation Between Longleaf Partners and World Energy
Can any of the company-specific risk be diversified away by investing in both Longleaf Partners and World Energy 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 Longleaf Partners and World Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Longleaf Partners Fund and World Energy Fund, you can compare the effects of market volatilities on Longleaf Partners and World Energy 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 Longleaf Partners with a short position of World Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Longleaf Partners and World Energy.
Diversification Opportunities for Longleaf Partners and World Energy
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Longleaf and World is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Longleaf Partners Fund and World Energy Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on World Energy and Longleaf Partners 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 Longleaf Partners Fund are associated (or correlated) with World Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of World Energy has no effect on the direction of Longleaf Partners i.e., Longleaf Partners and World Energy go up and down completely randomly.
Pair Corralation between Longleaf Partners and World Energy
Assuming the 90 days horizon Longleaf Partners is expected to generate 6.19 times less return on investment than World Energy. But when comparing it to its historical volatility, Longleaf Partners Fund is 1.8 times less risky than World Energy. It trades about 0.08 of its potential returns per unit of risk. World Energy Fund is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest 1,426 in World Energy Fund on August 28, 2024 and sell it today you would earn a total of 113.00 from holding World Energy Fund or generate 7.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Longleaf Partners Fund vs. World Energy Fund
Performance |
| Timeline |
| Longleaf Partners |
| World Energy |
Longleaf Partners and World Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Longleaf Partners and World Energy
The main advantage of trading using opposite Longleaf Partners and World Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Longleaf Partners position performs unexpectedly, World Energy 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 World Energy will offset losses from the drop in World Energy's long position.| Longleaf Partners vs. Longleaf Partners Global | Longleaf Partners vs. Longleaf Partners Small Cap | Longleaf Partners vs. Northern Institutional Funds | Longleaf Partners vs. Dreyfus Yield Enhancement |
| World Energy vs. Highland Longshort Healthcare | World Energy vs. Fidelity Advisor Health | World Energy vs. Delaware Healthcare Fund | World Energy vs. Allianzgi Health Sciences |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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