Correlation Between Third Avenue and Longleaf Partners
Can any of the company-specific risk be diversified away by investing in both Third Avenue and Longleaf Partners 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 Longleaf Partners 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 Longleaf Partners Fund, you can compare the effects of market volatilities on Third Avenue and Longleaf Partners 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 Longleaf Partners. Check out your portfolio center. Please also check ongoing floating volatility patterns of Third Avenue and Longleaf Partners.
Diversification Opportunities for Third Avenue and Longleaf Partners
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Third and Longleaf is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Third Avenue Value and Longleaf Partners Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Longleaf Partners 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 Longleaf Partners. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Longleaf Partners has no effect on the direction of Third Avenue i.e., Third Avenue and Longleaf Partners go up and down completely randomly.
Pair Corralation between Third Avenue and Longleaf Partners
Assuming the 90 days horizon Third Avenue is expected to generate 1.79 times less return on investment than Longleaf Partners. In addition to that, Third Avenue is 1.01 times more volatile than Longleaf Partners Fund. It trades about 0.04 of its total potential returns per unit of risk. Longleaf Partners Fund is currently generating about 0.07 per unit of volatility. If you would invest 1,884 in Longleaf Partners Fund on August 26, 2024 and sell it today you would earn a total of 682.00 from holding Longleaf Partners Fund or generate 36.2% 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 Value vs. Longleaf Partners Fund
Performance |
| Timeline |
| Third Avenue Value |
| Longleaf Partners |
Third Avenue and Longleaf Partners Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Third Avenue and Longleaf Partners
The main advantage of trading using opposite Third Avenue and Longleaf Partners positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Third Avenue position performs unexpectedly, Longleaf Partners 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 Longleaf Partners will offset losses from the drop in Longleaf Partners' long position.| Third Avenue vs. Third Avenue Real | Third Avenue vs. Third Avenue Small Cap | Third Avenue vs. Rems International Real | Third Avenue vs. Third Avenue Real |
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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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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