Correlation Between Third Avenue and Global Gold
Can any of the company-specific risk be diversified away by investing in both Third Avenue and Global Gold 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 Global Gold 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 Global Gold Fund, you can compare the effects of market volatilities on Third Avenue and Global Gold 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 Global Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Third Avenue and Global Gold.
Diversification Opportunities for Third Avenue and Global Gold
0.14 | Correlation Coefficient |
Average diversification
The 3 months correlation between Third and Global is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Third Avenue Value and Global Gold Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Gold Fund 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 Global Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Gold Fund has no effect on the direction of Third Avenue i.e., Third Avenue and Global Gold go up and down completely randomly.
Pair Corralation between Third Avenue and Global Gold
Assuming the 90 days horizon Third Avenue is expected to generate 1.86 times less return on investment than Global Gold. But when comparing it to its historical volatility, Third Avenue Value is 1.81 times less risky than Global Gold. It trades about 0.04 of its potential returns per unit of risk. Global Gold Fund is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 960.00 in Global Gold Fund on August 30, 2024 and sell it today you would earn a total of 314.00 from holding Global Gold Fund or generate 32.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Third Avenue Value vs. Global Gold Fund
Performance |
| Timeline |
| Third Avenue Value |
| Global Gold Fund |
Third Avenue and Global Gold Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Third Avenue and Global Gold
The main advantage of trading using opposite Third Avenue and Global Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Third Avenue position performs unexpectedly, Global Gold 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 Global Gold will offset losses from the drop in Global Gold's long position.| Third Avenue vs. Pace Smallmedium Value | Third Avenue vs. Hennessy Nerstone Mid | Third Avenue vs. American Century Etf | Third Avenue vs. Lord Abbett Small |
| Global Gold vs. First Eagle Gold | Global Gold vs. Aquagold International | Global Gold vs. Morningstar Unconstrained Allocation | Global Gold vs. Thrivent High Yield |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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