Correlation Between Longleaf Partners and E Mini
Can any of the company-specific risk be diversified away by investing in both Longleaf Partners and E Mini 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 E Mini 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 E Mini SP 500, you can compare the effects of market volatilities on Longleaf Partners and E Mini 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 E Mini. Check out your portfolio center. Please also check ongoing floating volatility patterns of Longleaf Partners and E Mini.
Diversification Opportunities for Longleaf Partners and E Mini
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Longleaf and ESUSD is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Longleaf Partners Fund and E Mini SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on E Mini SP 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 E Mini. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of E Mini SP has no effect on the direction of Longleaf Partners i.e., Longleaf Partners and E Mini go up and down completely randomly.
Pair Corralation between Longleaf Partners and E Mini
Assuming the 90 days horizon Longleaf Partners is expected to generate 1.61 times less return on investment than E Mini. In addition to that, Longleaf Partners is 1.08 times more volatile than E Mini SP 500. It trades about 0.07 of its total potential returns per unit of risk. E Mini SP 500 is currently generating about 0.12 per unit of volatility. If you would invest 450,250 in E Mini SP 500 on August 29, 2024 and sell it today you would earn a total of 151,250 from holding E Mini SP 500 or generate 33.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 97.5% |
| Values | Daily Returns |
Longleaf Partners Fund vs. E Mini SP 500
Performance |
| Timeline |
| Longleaf Partners |
| E Mini SP |
Longleaf Partners and E Mini Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Longleaf Partners and E Mini
The main advantage of trading using opposite Longleaf Partners and E Mini positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Longleaf Partners position performs unexpectedly, E Mini 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 E Mini will offset losses from the drop in E Mini's long position.| Longleaf Partners vs. Versatile Bond Portfolio | Longleaf Partners vs. California Bond Fund | Longleaf Partners vs. Barings Active Short | Longleaf Partners vs. Astor Longshort 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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