Correlation Between Smallcap Fund and Third Avenue
Can any of the company-specific risk be diversified away by investing in both Smallcap Fund 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 Smallcap Fund and Third Avenue into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Smallcap Fund Fka and Third Avenue Real, you can compare the effects of market volatilities on Smallcap Fund 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 Smallcap Fund with a short position of Third Avenue. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smallcap Fund and Third Avenue.
Diversification Opportunities for Smallcap Fund and Third Avenue
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Smallcap and Third is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Smallcap Fund Fka and Third Avenue Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Third Avenue Real and Smallcap Fund 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 Smallcap Fund Fka 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 Real has no effect on the direction of Smallcap Fund i.e., Smallcap Fund and Third Avenue go up and down completely randomly.
Pair Corralation between Smallcap Fund and Third Avenue
Assuming the 90 days horizon Smallcap Fund Fka is expected to generate 1.1 times more return on investment than Third Avenue. However, Smallcap Fund is 1.1 times more volatile than Third Avenue Real. It trades about 0.07 of its potential returns per unit of risk. Third Avenue Real is currently generating about 0.08 per unit of risk. If you would invest 2,392 in Smallcap Fund Fka on November 3, 2024 and sell it today you would earn a total of 256.00 from holding Smallcap Fund Fka or generate 10.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Smallcap Fund Fka vs. Third Avenue Real
Performance |
| Timeline |
| Smallcap Fund Fka |
| Third Avenue Real |
Smallcap Fund and Third Avenue Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Smallcap Fund and Third Avenue
The main advantage of trading using opposite Smallcap Fund and Third Avenue positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Smallcap Fund 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.| Smallcap Fund vs. Vanguard Small Cap Index | Smallcap Fund vs. Vanguard Small Cap Index | Smallcap Fund vs. Vanguard Small Cap Index | Smallcap Fund vs. Vanguard Small Cap Index |
| Third Avenue vs. Transamerica Mlp Energy | Third Avenue vs. Adams Natural Resources | Third Avenue vs. Thrivent Natural Resources | Third Avenue vs. Goehring Rozencwajg Resources |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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