Correlation Between Third Avenue and Vanguard Global
Can any of the company-specific risk be diversified away by investing in both Third Avenue and Vanguard Global 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 Vanguard Global into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Third Avenue Real and Vanguard Global Ex Us, you can compare the effects of market volatilities on Third Avenue and Vanguard Global 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 Vanguard Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Third Avenue and Vanguard Global.
Diversification Opportunities for Third Avenue and Vanguard Global
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Third and Vanguard is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Third Avenue Real and Vanguard Global Ex Us in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Global Ex 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 Real are associated (or correlated) with Vanguard Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Global Ex has no effect on the direction of Third Avenue i.e., Third Avenue and Vanguard Global go up and down completely randomly.
Pair Corralation between Third Avenue and Vanguard Global
Assuming the 90 days horizon Third Avenue Real is expected to generate 1.24 times more return on investment than Vanguard Global. However, Third Avenue is 1.24 times more volatile than Vanguard Global Ex Us. It trades about 0.0 of its potential returns per unit of risk. Vanguard Global Ex Us is currently generating about -0.02 per unit of risk. If you would invest 2,143 in Third Avenue Real on January 21, 2024 and sell it today you would lose (89.00) from holding Third Avenue Real or give up 4.15% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Third Avenue Real vs. Vanguard Global Ex Us
Performance |
| Timeline |
| Third Avenue Real |
| Vanguard Global Ex |
Third Avenue and Vanguard Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Third Avenue and Vanguard Global
The main advantage of trading using opposite Third Avenue and Vanguard Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Third Avenue position performs unexpectedly, Vanguard Global 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 Vanguard Global will offset losses from the drop in Vanguard Global's long position.| Third Avenue vs. Third Avenue Small Cap | Third Avenue vs. Baron Real Estate | Third Avenue vs. Third Avenue Value | Third Avenue vs. Artisan Global Value |
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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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