Correlation Between Longleaf Partners and Mairs Power
Can any of the company-specific risk be diversified away by investing in both Longleaf Partners and Mairs Power 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 Mairs Power 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 Mairs Power Growth, you can compare the effects of market volatilities on Longleaf Partners and Mairs Power 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 Mairs Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Longleaf Partners and Mairs Power.
Diversification Opportunities for Longleaf Partners and Mairs Power
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Longleaf and Mairs is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Longleaf Partners Fund and Mairs Power Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mairs Power Growth 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 Mairs Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mairs Power Growth has no effect on the direction of Longleaf Partners i.e., Longleaf Partners and Mairs Power go up and down completely randomly.
Pair Corralation between Longleaf Partners and Mairs Power
Assuming the 90 days horizon Longleaf Partners is expected to generate 1.06 times less return on investment than Mairs Power. But when comparing it to its historical volatility, Longleaf Partners Fund is 1.17 times less risky than Mairs Power. It trades about 0.12 of its potential returns per unit of risk. Mairs Power Growth is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 16,235 in Mairs Power Growth on August 29, 2024 and sell it today you would earn a total of 2,012 from holding Mairs Power Growth or generate 12.39% 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. Mairs Power Growth
Performance |
| Timeline |
| Longleaf Partners |
| Mairs Power Growth |
Longleaf Partners and Mairs Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Longleaf Partners and Mairs Power
The main advantage of trading using opposite Longleaf Partners and Mairs Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Longleaf Partners position performs unexpectedly, Mairs Power 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 Mairs Power will offset losses from the drop in Mairs Power'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 |
| Mairs Power vs. Vanguard Total Stock | Mairs Power vs. Vanguard 500 Index | Mairs Power vs. Vanguard Total Stock | Mairs Power vs. Vanguard Total Stock |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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