Correlation Between Third Avenue and Value Fund
Can any of the company-specific risk be diversified away by investing in both Third Avenue and Value Fund 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 Value Fund 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 Value Fund Value, you can compare the effects of market volatilities on Third Avenue and Value Fund 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 Value Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Third Avenue and Value Fund.
Diversification Opportunities for Third Avenue and Value Fund
-0.46 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Third and Value is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Third Avenue Value and Value Fund Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Value Fund Value 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 Value Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Value Fund Value has no effect on the direction of Third Avenue i.e., Third Avenue and Value Fund go up and down completely randomly.
Pair Corralation between Third Avenue and Value Fund
Assuming the 90 days horizon Third Avenue is expected to generate 1.33 times less return on investment than Value Fund. But when comparing it to its historical volatility, Third Avenue Value is 1.1 times less risky than Value Fund. It trades about 0.04 of its potential returns per unit of risk. Value Fund Value is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 5,013 in Value Fund Value on August 29, 2024 and sell it today you would earn a total of 1,245 from holding Value Fund Value or generate 24.84% 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. Value Fund Value
Performance |
| Timeline |
| Third Avenue Value |
| Value Fund Value |
Third Avenue and Value Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Third Avenue and Value Fund
The main advantage of trading using opposite Third Avenue and Value Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Third Avenue position performs unexpectedly, Value Fund 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 Value Fund will offset losses from the drop in Value Fund'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 |
| Value Fund vs. Dodge Cox Stock | Value Fund vs. Dunham Large Cap | Value Fund vs. Qs Large Cap | Value Fund vs. Touchstone Large Cap |
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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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