Correlation Between Third Avenue and American Century
Can any of the company-specific risk be diversified away by investing in both Third Avenue and American Century 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 American Century 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 American Century Real, you can compare the effects of market volatilities on Third Avenue and American Century 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 American Century. Check out your portfolio center. Please also check ongoing floating volatility patterns of Third Avenue and American Century.
Diversification Opportunities for Third Avenue and American Century
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Third and American is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Third Avenue Real and American Century Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Century Real 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 American Century. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Century Real has no effect on the direction of Third Avenue i.e., Third Avenue and American Century go up and down completely randomly.
Pair Corralation between Third Avenue and American Century
Assuming the 90 days horizon Third Avenue Real is expected to generate 0.94 times more return on investment than American Century. However, Third Avenue Real is 1.07 times less risky than American Century. It trades about 0.14 of its potential returns per unit of risk. American Century Real is currently generating about 0.02 per unit of risk. If you would invest 2,314 in Third Avenue Real on October 22, 2024 and sell it today you would earn a total of 57.00 from holding Third Avenue Real or generate 2.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Third Avenue Real vs. American Century Real
Performance |
| Timeline |
| Third Avenue Real |
| American Century Real |
Third Avenue and American Century Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Third Avenue and American Century
The main advantage of trading using opposite Third Avenue and American Century positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Third Avenue position performs unexpectedly, American Century 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 American Century will offset losses from the drop in American Century's long position.| Third Avenue vs. Smallcap Fund Fka | Third Avenue vs. Praxis Small Cap | Third Avenue vs. Ab Small Cap | Third Avenue vs. Touchstone Small Cap |
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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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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