Correlation Between Third Avenue and Real Estate
Can any of the company-specific risk be diversified away by investing in both Third Avenue and Real Estate 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 Real Estate 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 Real Estate Series, you can compare the effects of market volatilities on Third Avenue and Real Estate 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 Real Estate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Third Avenue and Real Estate.
Diversification Opportunities for Third Avenue and Real Estate
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Third and Real is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Third Avenue Small Cap and Real Estate Series in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Real Estate Series 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 Real Estate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Real Estate Series has no effect on the direction of Third Avenue i.e., Third Avenue and Real Estate go up and down completely randomly.
Pair Corralation between Third Avenue and Real Estate
Assuming the 90 days horizon Third Avenue is expected to generate 2.39 times less return on investment than Real Estate. In addition to that, Third Avenue is 1.46 times more volatile than Real Estate Series. It trades about 0.06 of its total potential returns per unit of risk. Real Estate Series is currently generating about 0.22 per unit of volatility. If you would invest 1,113 in Real Estate Series on September 1, 2024 and sell it today you would earn a total of 188.00 from holding Real Estate Series or generate 16.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 73.81% |
| Values | Daily Returns |
Third Avenue Small Cap vs. Real Estate Series
Performance |
| Timeline |
| Third Avenue Small |
| Real Estate Series |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
OK
Third Avenue and Real Estate Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Third Avenue and Real Estate
The main advantage of trading using opposite Third Avenue and Real Estate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Third Avenue position performs unexpectedly, Real Estate 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 Real Estate will offset losses from the drop in Real Estate'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 Small |
| Real Estate vs. Amg Managers Centersquare | Real Estate vs. Baron Real Estate | Real Estate vs. West Loop Realty | Real Estate vs. Nuveen Real Estate |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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