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 Small Cap 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
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Third and Pear is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Third Avenue Small Cap 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 Small Cap 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 Small Cap is expected to under-perform the Pear Tree. But the mutual fund apears to be less risky and, when comparing its historical volatility, Third Avenue Small Cap is 1.53 times less risky than Pear Tree. The mutual fund trades about -0.16 of its potential returns per unit of risk. The Pear Tree Essex is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest 669.00 in Pear Tree Essex on September 13, 2024 and sell it today you would lose (12.00) from holding Pear Tree Essex or give up 1.79% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Third Avenue Small Cap vs. Pear Tree Essex
Performance |
| Timeline |
| Third Avenue Small |
| 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 Real | Third Avenue vs. Rems International Real | Third Avenue vs. Third Avenue Real | Third Avenue vs. Third Avenue Real |
| 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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