Correlation Between Us Small and Third Avenue
Can any of the company-specific risk be diversified away by investing in both Us Small 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 Us Small and Third Avenue into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Us Small Cap and Third Avenue Small Cap, you can compare the effects of market volatilities on Us Small 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 Us Small with a short position of Third Avenue. Check out your portfolio center. Please also check ongoing floating volatility patterns of Us Small and Third Avenue.
Diversification Opportunities for Us Small and Third Avenue
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between DFSVX and Third is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Us Small Cap and Third Avenue Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Third Avenue Small and Us Small 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 Us Small Cap 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 Us Small i.e., Us Small and Third Avenue go up and down completely randomly.
Pair Corralation between Us Small and Third Avenue
Assuming the 90 days horizon Us Small Cap is expected to generate 1.24 times more return on investment than Third Avenue. However, Us Small is 1.24 times more volatile than Third Avenue Small Cap. It trades about 0.25 of its potential returns per unit of risk. Third Avenue Small Cap is currently generating about 0.31 per unit of risk. If you would invest 4,020 in Us Small Cap on April 13, 2025 and sell it today you would earn a total of 831.00 from holding Us Small Cap or generate 20.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 98.39% |
| Values | Daily Returns |
Us Small Cap vs. Third Avenue Small Cap
Performance |
| Timeline |
| Us Small Cap |
| Third Avenue Small |
Us Small and Third Avenue Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Us Small and Third Avenue
The main advantage of trading using opposite Us Small and Third Avenue positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Us Small 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.| Us Small vs. Us Micro Cap | Us Small vs. Dfa International Small | Us Small vs. Us Large Cap | Us Small vs. International Small Pany |
| Third Avenue vs. Third Avenue Value | Third Avenue vs. Third Avenue Real | Third Avenue vs. Muhlenkamp Fund Institutional | Third Avenue vs. Longleaf Partners Fund |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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