Correlation Between Third Avenue and Pear Tree
Can any of the company-specific risk be diversified away by investing in both Third Avenue and Pear Tree 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 Pear Tree into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Third Avenue Real and Pear Tree Essex, you can compare the effects of market volatilities on Third Avenue and Pear Tree 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 Pear Tree. Check out your portfolio center. Please also check ongoing floating volatility patterns of Third Avenue and Pear Tree.
Diversification Opportunities for Third Avenue and Pear Tree
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Third and Pear is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Third Avenue Real and Pear Tree Essex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pear Tree Essex 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 Real are associated (or correlated) with Pear Tree. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pear Tree Essex has no effect on the direction of Third Avenue i.e., Third Avenue and Pear Tree go up and down completely randomly.
Pair Corralation between Third Avenue and Pear Tree
Assuming the 90 days horizon Third Avenue Real is expected to generate 0.88 times more return on investment than Pear Tree. However, Third Avenue Real is 1.14 times less risky than Pear Tree. It trades about 0.11 of its potential returns per unit of risk. Pear Tree Essex is currently generating about -0.09 per unit of risk. If you would invest 2,523 in Third Avenue Real on September 13, 2024 and sell it today you would earn a total of 44.00 from holding Third Avenue Real or generate 1.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Third Avenue Real vs. Pear Tree Essex
Performance |
| Timeline |
| Third Avenue Real |
| Pear Tree Essex |
Third Avenue and Pear Tree Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Third Avenue and Pear Tree
The main advantage of trading using opposite Third Avenue and Pear Tree positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Third Avenue position performs unexpectedly, Pear Tree 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 Pear Tree will offset losses from the drop in Pear Tree's long position.| Third Avenue vs. Third Avenue Value | Third Avenue vs. Third Avenue Small Cap | Third Avenue vs. Alpine Realty Income | Third Avenue vs. The Fairholme Fund |
| Pear Tree vs. Essex Environmental Opportunities | Pear Tree vs. Pear Tree Quality | Pear Tree vs. Pear Tree Polaris | Pear Tree vs. Pear Tree Polaris |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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