Correlation Between Third Avenue and The Fairholme
Can any of the company-specific risk be diversified away by investing in both Third Avenue 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 Third Avenue and The Fairholme into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Third Avenue Small Cap and The Fairholme Fund, you can compare the effects of market volatilities on Third Avenue 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 Third Avenue with a short position of The Fairholme. Check out your portfolio center. Please also check ongoing floating volatility patterns of Third Avenue and The Fairholme.
Diversification Opportunities for Third Avenue and The Fairholme
-0.21 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Third and The is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Third Avenue Small Cap and The Fairholme Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The Fairholme 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 Small Cap 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 Third Avenue i.e., Third Avenue and The Fairholme go up and down completely randomly.
Pair Corralation between Third Avenue and The Fairholme
Assuming the 90 days horizon Third Avenue Small Cap is expected to generate 0.82 times more return on investment than The Fairholme. However, Third Avenue Small Cap is 1.22 times less risky than The Fairholme. It trades about 0.01 of its potential returns per unit of risk. The Fairholme Fund is currently generating about -0.02 per unit of risk. If you would invest 2,177 in Third Avenue Small Cap on August 26, 2024 and sell it today you would earn a total of 62.00 from holding Third Avenue Small Cap or generate 2.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Third Avenue Small Cap vs. The Fairholme Fund
Performance |
| Timeline |
| Third Avenue Small |
| The Fairholme |
Third Avenue and The Fairholme Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Third Avenue and The Fairholme
The main advantage of trading using opposite Third Avenue and The Fairholme positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Third Avenue 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.| Third Avenue vs. Third Avenue Value | Third Avenue vs. Third Avenue Real | Third Avenue vs. Muhlenkamp Fund Institutional | Third Avenue vs. Longleaf Partners Fund |
| 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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