Correlation Between Precious Metals and Third Avenue
Can any of the company-specific risk be diversified away by investing in both Precious Metals 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 Precious Metals and Third Avenue into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Precious Metals Ultrasector and Third Avenue Small Cap, you can compare the effects of market volatilities on Precious Metals 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 Precious Metals with a short position of Third Avenue. Check out your portfolio center. Please also check ongoing floating volatility patterns of Precious Metals and Third Avenue.
Diversification Opportunities for Precious Metals and Third Avenue
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Precious and Third is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Precious Metals Ultrasector 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 Precious Metals 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 Precious Metals Ultrasector 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 Precious Metals i.e., Precious Metals and Third Avenue go up and down completely randomly.
Pair Corralation between Precious Metals and Third Avenue
Assuming the 90 days horizon Precious Metals Ultrasector is expected to generate 2.92 times more return on investment than Third Avenue. However, Precious Metals is 2.92 times more volatile than Third Avenue Small Cap. It trades about 0.23 of its potential returns per unit of risk. Third Avenue Small Cap is currently generating about 0.21 per unit of risk. If you would invest 6,925 in Precious Metals Ultrasector on June 8, 2025 and sell it today you would earn a total of 3,082 from holding Precious Metals Ultrasector or generate 44.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Precious Metals Ultrasector vs. Third Avenue Small Cap
Performance |
| Timeline |
| Precious Metals Ultr |
| Third Avenue Small |
Precious Metals and Third Avenue Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Precious Metals and Third Avenue
The main advantage of trading using opposite Precious Metals and Third Avenue positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Precious Metals 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.| Precious Metals vs. Intermediate Term Tax Free Bond | Precious Metals vs. Vanguard Intermediate Term Tax Exempt | Precious Metals vs. Access Capital Munity | Precious Metals vs. Ishares Municipal Bond |
| Third Avenue vs. Third Avenue Value | Third Avenue vs. Muhlenkamp Fund Institutional | Third Avenue vs. Longleaf Partners Fund | Third Avenue vs. Selected American Shares |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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