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 Value 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
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Third and The is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Third Avenue Value 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 Value 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 Value is expected to under-perform the The Fairholme. But the mutual fund apears to be less risky and, when comparing its historical volatility, Third Avenue Value is 1.11 times less risky than The Fairholme. The mutual fund trades about -0.1 of its potential returns per unit of risk. The The Fairholme Fund is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest 3,338 in The Fairholme Fund on August 29, 2024 and sell it today you would lose (38.00) from holding The Fairholme Fund or give up 1.14% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Third Avenue Value vs. The Fairholme Fund
Performance |
| Timeline |
| Third Avenue Value |
| 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. Ab Small Cap | Third Avenue vs. T Rowe Price | Third Avenue vs. Artisan Thematic Fund | Third Avenue vs. Small Cap Stock |
| The Fairholme vs. Multisector Bond Sma | The Fairholme vs. Icon Bond Fund | The Fairholme vs. Ultra Short Fixed Income | The Fairholme vs. Versatile Bond Portfolio |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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