Correlation Between Smead Value and Third Avenue
Can any of the company-specific risk be diversified away by investing in both Smead Value 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 Smead Value and Third Avenue into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Smead Value Fund and Third Avenue Small Cap, you can compare the effects of market volatilities on Smead Value 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 Smead Value with a short position of Third Avenue. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smead Value and Third Avenue.
Diversification Opportunities for Smead Value and Third Avenue
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Smead and Third is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Smead Value 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 Smead Value 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 Smead Value 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 Smead Value i.e., Smead Value and Third Avenue go up and down completely randomly.
Pair Corralation between Smead Value and Third Avenue
Assuming the 90 days horizon Smead Value Fund is expected to generate 1.26 times more return on investment than Third Avenue. However, Smead Value is 1.26 times more volatile than Third Avenue Small Cap. It trades about -0.15 of its potential returns per unit of risk. Third Avenue Small Cap is currently generating about -0.22 per unit of risk. If you would invest 8,538 in Smead Value Fund on September 12, 2024 and sell it today you would lose (214.00) from holding Smead Value Fund or give up 2.51% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Smead Value Fund vs. Third Avenue Small Cap
Performance |
| Timeline |
| Smead Value Fund |
| Third Avenue Small |
Smead Value and Third Avenue Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Smead Value and Third Avenue
The main advantage of trading using opposite Smead Value and Third Avenue positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Smead Value 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.| Smead Value vs. Vanguard Value Index | Smead Value vs. Dodge Cox Stock | Smead Value vs. American Mutual Fund | Smead Value vs. American Funds American |
| Third Avenue vs. Vanguard Small Cap Value | Third Avenue vs. SCOR PK | Third Avenue vs. Morningstar Unconstrained Allocation | Third Avenue vs. Thrivent High Yield |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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