Correlation Between Permanent Portfolio and The Fairholme
Can any of the company-specific risk be diversified away by investing in both Permanent Portfolio and The Fairholme 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 Permanent Portfolio and The Fairholme into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Permanent Portfolio Class and The Fairholme Fund, you can compare the effects of market volatilities on Permanent Portfolio and The Fairholme 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 Permanent Portfolio with a short position of The Fairholme. Check out your portfolio center. Please also check ongoing floating volatility patterns of Permanent Portfolio and The Fairholme.
Diversification Opportunities for Permanent Portfolio and The Fairholme
-0.64 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Permanent and The is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Permanent Portfolio Class and The Fairholme Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The Fairholme and Permanent Portfolio 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 Permanent Portfolio Class are associated (or correlated) with The Fairholme. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of The Fairholme has no effect on the direction of Permanent Portfolio i.e., Permanent Portfolio and The Fairholme go up and down completely randomly.
Pair Corralation between Permanent Portfolio and The Fairholme
Assuming the 90 days horizon Permanent Portfolio is expected to generate 1.2 times less return on investment than The Fairholme. But when comparing it to its historical volatility, Permanent Portfolio Class is 2.73 times less risky than The Fairholme. It trades about 0.12 of its potential returns per unit of risk. The Fairholme Fund is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 2,327 in The Fairholme Fund on August 26, 2024 and sell it today you would earn a total of 946.00 from holding The Fairholme Fund or generate 40.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Permanent Portfolio Class vs. The Fairholme Fund
Performance |
| Timeline |
| Permanent Portfolio Class |
| The Fairholme |
Permanent Portfolio and The Fairholme Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Permanent Portfolio and The Fairholme
The main advantage of trading using opposite Permanent Portfolio and The Fairholme positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Permanent Portfolio position performs unexpectedly, The Fairholme 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 The Fairholme will offset losses from the drop in The Fairholme's long position.| Permanent Portfolio vs. The Fairholme Fund | Permanent Portfolio vs. Fpa Crescent Fund | Permanent Portfolio vs. Amg Yacktman Fund | Permanent Portfolio vs. Hussman Strategic Total |
| The Fairholme vs. The Fairholme Focused | The Fairholme vs. Vanguard Wellington Fund | The Fairholme vs. Vanguard Materials Index | The Fairholme vs. Vanguard Target Retirement |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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