Correlation Between Longleaf Partners and Absolute Strategies
Can any of the company-specific risk be diversified away by investing in both Longleaf Partners and Absolute Strategies 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 Absolute Strategies 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 Absolute Strategies Fund, you can compare the effects of market volatilities on Longleaf Partners and Absolute Strategies 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 Absolute Strategies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Longleaf Partners and Absolute Strategies.
Diversification Opportunities for Longleaf Partners and Absolute Strategies
-0.7 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Longleaf and Absolute is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Longleaf Partners Fund and Absolute Strategies Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Absolute Strategies 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 Absolute Strategies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Absolute Strategies has no effect on the direction of Longleaf Partners i.e., Longleaf Partners and Absolute Strategies go up and down completely randomly.
Pair Corralation between Longleaf Partners and Absolute Strategies
Assuming the 90 days horizon Longleaf Partners Fund is expected to generate 2.09 times more return on investment than Absolute Strategies. However, Longleaf Partners is 2.09 times more volatile than Absolute Strategies Fund. It trades about 0.07 of its potential returns per unit of risk. Absolute Strategies Fund is currently generating about -0.07 per unit of risk. If you would invest 1,884 in Longleaf Partners Fund on August 24, 2024 and sell it today you would earn a total of 682.00 from holding Longleaf Partners Fund or generate 36.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 97.18% |
| Values | Daily Returns |
Longleaf Partners Fund vs. Absolute Strategies Fund
Performance |
| Timeline |
| Longleaf Partners |
| Absolute Strategies |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Longleaf Partners and Absolute Strategies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Longleaf Partners and Absolute Strategies
The main advantage of trading using opposite Longleaf Partners and Absolute Strategies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Longleaf Partners position performs unexpectedly, Absolute Strategies 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 Absolute Strategies will offset losses from the drop in Absolute Strategies' long position.| Longleaf Partners vs. Vanguard Capital Opportunity | Longleaf Partners vs. Vanguard Primecap E | Longleaf Partners vs. Vanguard Dividend Growth | Longleaf Partners vs. Vanguard Strategic Equity |
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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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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