Correlation Between Longleaf Partners and Third Avenue
Can any of the company-specific risk be diversified away by investing in both Longleaf Partners and Third Avenue 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 Third Avenue 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 Third Avenue Small Cap, you can compare the effects of market volatilities on Longleaf Partners and Third Avenue 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 Third Avenue. Check out your portfolio center. Please also check ongoing floating volatility patterns of Longleaf Partners and Third Avenue.
Diversification Opportunities for Longleaf Partners and Third Avenue
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Longleaf and Third is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Longleaf Partners Fund and Third Avenue Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Third Avenue Small 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 Third Avenue. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Third Avenue Small has no effect on the direction of Longleaf Partners i.e., Longleaf Partners and Third Avenue go up and down completely randomly.
Pair Corralation between Longleaf Partners and Third Avenue
Assuming the 90 days horizon Longleaf Partners Fund is expected to generate 0.83 times more return on investment than Third Avenue. However, Longleaf Partners Fund is 1.21 times less risky than Third Avenue. It trades about 0.07 of its potential returns per unit of risk. Third Avenue Small Cap is currently generating about 0.02 per unit of risk. If you would invest 1,884 in Longleaf Partners Fund on August 26, 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 Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Longleaf Partners Fund vs. Third Avenue Small Cap
Performance |
| Timeline |
| Longleaf Partners |
| Third Avenue Small |
Longleaf Partners and Third Avenue Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Longleaf Partners and Third Avenue
The main advantage of trading using opposite Longleaf Partners and Third Avenue positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Longleaf Partners position performs unexpectedly, Third Avenue 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 Third Avenue will offset losses from the drop in Third Avenue's long position.| Longleaf Partners vs. Vanguard Short Term Government | Longleaf Partners vs. Nuveen All American Municipal | Longleaf Partners vs. Oklahoma Municipal Fund | Longleaf Partners vs. T Rowe Price |
| Third Avenue vs. Third Avenue Value | Third Avenue vs. Third Avenue Real | Third Avenue vs. Muhlenkamp Fund Institutional | Third Avenue vs. Longleaf Partners 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 Stocks Directory module to find actively traded stocks across global markets.
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