Correlation Between Longleaf Partners and Sp 500
Can any of the company-specific risk be diversified away by investing in both Longleaf Partners and Sp 500 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 Sp 500 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Longleaf Partners Small Cap and Sp 500 Index, you can compare the effects of market volatilities on Longleaf Partners and Sp 500 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 Sp 500. Check out your portfolio center. Please also check ongoing floating volatility patterns of Longleaf Partners and Sp 500.
Diversification Opportunities for Longleaf Partners and Sp 500
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Longleaf and USPRX is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Longleaf Partners Small Cap and Sp 500 Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sp 500 Index 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 Small Cap are associated (or correlated) with Sp 500. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sp 500 Index has no effect on the direction of Longleaf Partners i.e., Longleaf Partners and Sp 500 go up and down completely randomly.
Pair Corralation between Longleaf Partners and Sp 500
Assuming the 90 days horizon Longleaf Partners Small Cap is expected to generate 1.01 times more return on investment than Sp 500. However, Longleaf Partners is 1.01 times more volatile than Sp 500 Index. It trades about 0.33 of its potential returns per unit of risk. Sp 500 Index is currently generating about 0.21 per unit of risk. If you would invest 2,760 in Longleaf Partners Small Cap on August 29, 2024 and sell it today you would earn a total of 176.00 from holding Longleaf Partners Small Cap or generate 6.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Longleaf Partners Small Cap vs. Sp 500 Index
Performance |
| Timeline |
| Longleaf Partners Small |
| Sp 500 Index |
Longleaf Partners and Sp 500 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Longleaf Partners and Sp 500
The main advantage of trading using opposite Longleaf Partners and Sp 500 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Longleaf Partners position performs unexpectedly, Sp 500 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 Sp 500 will offset losses from the drop in Sp 500's long position.| Longleaf Partners vs. Longleaf Partners Global | Longleaf Partners vs. Longleaf Partners International | Longleaf Partners vs. Longleaf Partners Fund | Longleaf Partners vs. Vanguard Target Retirement |
| Sp 500 vs. Small Cap Stock | Sp 500 vs. Extended Market Index | Sp 500 vs. Value Fund Value | Sp 500 vs. Income Stock 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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