Correlation Between Value Fund and Third Avenue
Can any of the company-specific risk be diversified away by investing in both Value Fund 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 Value Fund and Third Avenue into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Value Fund Value and Third Avenue Value, you can compare the effects of market volatilities on Value Fund 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 Value Fund with a short position of Third Avenue. Check out your portfolio center. Please also check ongoing floating volatility patterns of Value Fund and Third Avenue.
Diversification Opportunities for Value Fund and Third Avenue
-0.46 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Value and Third is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Value Fund Value and Third Avenue Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Third Avenue Value and Value Fund 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 Value Fund 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 Value has no effect on the direction of Value Fund i.e., Value Fund and Third Avenue go up and down completely randomly.
Pair Corralation between Value Fund and Third Avenue
Assuming the 90 days horizon Value Fund Value is expected to generate 1.1 times more return on investment than Third Avenue. However, Value Fund is 1.1 times more volatile than Third Avenue Value. It trades about 0.05 of its potential returns per unit of risk. Third Avenue Value is currently generating about 0.04 per unit of risk. If you would invest 4,880 in Value Fund Value on August 30, 2024 and sell it today you would earn a total of 1,199 from holding Value Fund Value or generate 24.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Value Fund Value vs. Third Avenue Value
Performance |
| Timeline |
| Value Fund Value |
| Third Avenue Value |
Value Fund and Third Avenue Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Value Fund and Third Avenue
The main advantage of trading using opposite Value Fund and Third Avenue positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Value Fund 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.| Value Fund vs. Vanguard Total Stock | Value Fund vs. Vanguard 500 Index | Value Fund vs. Vanguard Total Stock | Value Fund vs. Vanguard Total Stock |
| Third Avenue vs. Ab Small Cap | Third Avenue vs. T Rowe Price | Third Avenue vs. Artisan Thematic Fund | Third Avenue vs. Small Cap Stock |
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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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