Correlation Between The Fairholme and Lateef Focused

Can any of the company-specific risk be diversified away by investing in both The Fairholme and Lateef Focused 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 The Fairholme and Lateef Focused into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between The Fairholme Focused and Lateef Focused Growth, you can compare the effects of market volatilities on The Fairholme and Lateef Focused 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 The Fairholme with a short position of Lateef Focused. Check out your portfolio center. Please also check ongoing floating volatility patterns of The Fairholme and Lateef Focused.

Diversification Opportunities for The Fairholme and Lateef Focused

0.11

Correlation Coefficient

The Fairholme  Lateef Focused

Average diversification

The 3 months correlation between The and Lateef is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding The Fairholme Focused and Lateef Focused Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lateef Focused Growth and The Fairholme 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 The Fairholme Focused are associated (or correlated) with Lateef Focused. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lateef Focused Growth has no effect on the direction of The Fairholme i.e., The Fairholme and Lateef Focused go up and down completely randomly.

Pair Corralation between The Fairholme and Lateef Focused

Assuming the 90 days horizon The Fairholme Focused is expected to generate 0.34 times more return on investment than Lateef Focused. However, The Fairholme Focused is 2.93 times less risky than Lateef Focused. It trades about 0.17 of its potential returns per unit of risk. Lateef Focused Growth is currently generating about -0.07 per unit of risk. If you would invest  1,359  in The Fairholme Focused on December 19, 2024 and sell it today you would earn a total of  66.00  from holding The Fairholme Focused or generate 4.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

The Fairholme Focused  vs.  Lateef Focused Growth

Fairholme Focused

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Fairholme Focused are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, The Fairholme is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Lateef Focused Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lateef Focused Growth has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with The Fairholme and Lateef Focused

The main advantage of trading using opposite The Fairholme and Lateef Focused positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if The Fairholme position performs unexpectedly, Lateef Focused 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 Lateef Focused will offset losses from the drop in Lateef Focused's long position.

The idea behind The Fairholme Focused and Lateef Focused Growth pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .