Correlation Between Third Avenue and Third Avenue
Can any of the company-specific risk be diversified away by investing in both Third Avenue and Third Avenue 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 Third Avenue 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 Third Avenue Small, you can compare the effects of market volatilities on Third Avenue and Third Avenue 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 Third Avenue. Check out your portfolio center. Please also check ongoing floating volatility patterns of Third Avenue and Third Avenue.
Diversification Opportunities for Third Avenue and Third Avenue
-0.14 | Correlation Coefficient |
Good diversification
The 3 months correlation between Third and Third is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Third Avenue Value and Third Avenue Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Third Avenue Small 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 Third Avenue. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Third Avenue Small has no effect on the direction of Third Avenue i.e., Third Avenue and Third Avenue go up and down completely randomly.
Pair Corralation between Third Avenue and Third Avenue
Assuming the 90 days horizon Third Avenue Value is expected to under-perform the Third Avenue. But the mutual fund apears to be less risky and, when comparing its historical volatility, Third Avenue Value is 1.66 times less risky than Third Avenue. The mutual fund trades about -0.07 of its potential returns per unit of risk. The Third Avenue Small is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 2,170 in Third Avenue Small on August 30, 2024 and sell it today you would earn a total of 88.00 from holding Third Avenue Small or generate 4.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Third Avenue Value vs. Third Avenue Small
Performance |
| Timeline |
| Third Avenue Value |
| Third Avenue Small |
Third Avenue and Third Avenue Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Third Avenue and Third Avenue
The main advantage of trading using opposite Third Avenue and Third Avenue positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Third Avenue position performs unexpectedly, Third Avenue 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 Third Avenue will offset losses from the drop in Third Avenue's long position.| Third Avenue vs. Third Avenue Real | Third Avenue vs. Third Avenue Small Cap | Third Avenue vs. Smead Value Fund | Third Avenue vs. Baron Focused Growth |
| Third Avenue vs. Fidelity Managed Retirement | Third Avenue vs. American Funds Retirement | Third Avenue vs. Target Retirement 2040 | Third Avenue vs. Hartford Moderate Allocation |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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