Correlation Between Third Avenue and Litman Gregory
Can any of the company-specific risk be diversified away by investing in both Third Avenue and Litman Gregory 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 Third Avenue and Litman Gregory into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Third Avenue Real and Litman Gregory Masters, you can compare the effects of market volatilities on Third Avenue and Litman Gregory 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 Third Avenue with a short position of Litman Gregory. Check out your portfolio center. Please also check ongoing floating volatility patterns of Third Avenue and Litman Gregory.
Diversification Opportunities for Third Avenue and Litman Gregory
-0.53 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Third and Litman is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Third Avenue Real and Litman Gregory Masters in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Litman Gregory Masters and Third Avenue 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 Third Avenue Real are associated (or correlated) with Litman Gregory. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Litman Gregory Masters has no effect on the direction of Third Avenue i.e., Third Avenue and Litman Gregory go up and down completely randomly.
Pair Corralation between Third Avenue and Litman Gregory
Assuming the 90 days horizon Third Avenue Real is expected to generate 1.21 times more return on investment than Litman Gregory. However, Third Avenue is 1.21 times more volatile than Litman Gregory Masters. It trades about 0.06 of its potential returns per unit of risk. Litman Gregory Masters is currently generating about 0.05 per unit of risk. If you would invest 1,755 in Third Avenue Real on September 13, 2024 and sell it today you would earn a total of 657.00 from holding Third Avenue Real or generate 37.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Third Avenue Real vs. Litman Gregory Masters
Performance |
| Timeline |
| Third Avenue Real |
| Litman Gregory Masters |
Third Avenue and Litman Gregory Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Third Avenue and Litman Gregory
The main advantage of trading using opposite Third Avenue and Litman Gregory positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Third Avenue position performs unexpectedly, Litman Gregory 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 Litman Gregory will offset losses from the drop in Litman Gregory's long position.| Third Avenue vs. Third Avenue Value | Third Avenue vs. Third Avenue Small Cap | Third Avenue vs. Alpine Realty Income | Third Avenue vs. The Fairholme Fund |
| Litman Gregory vs. Litman Gregory Masters | Litman Gregory vs. Litman Gregory Masters | Litman Gregory vs. Litman Gregory Masters | Litman Gregory vs. Imgp Oldfield International |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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