Correlation Between James Balanced and Longleaf Partners

Can any of the company-specific risk be diversified away by investing in both James Balanced and Longleaf Partners 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 James Balanced and Longleaf Partners into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between James Balanced Golden and Longleaf Partners International, you can compare the effects of market volatilities on James Balanced and Longleaf Partners 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 James Balanced with a short position of Longleaf Partners. Check out your portfolio center. Please also check ongoing floating volatility patterns of James Balanced and Longleaf Partners.

Diversification Opportunities for James Balanced and Longleaf Partners

0.37

Correlation Coefficient

James Balanced  Longleaf Partners

Weak diversification

The 3 months correlation between James and Longleaf is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding James Balanced Golden and Longleaf Partners Internationa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Longleaf Partners and James Balanced 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 James Balanced Golden are associated (or correlated) with Longleaf Partners. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Longleaf Partners has no effect on the direction of James Balanced i.e., James Balanced and Longleaf Partners go up and down completely randomly.

Pair Corralation between James Balanced and Longleaf Partners

Assuming the 90 days horizon James Balanced Golden is expected to generate 0.37 times more return on investment than Longleaf Partners. However, James Balanced Golden is 2.73 times less risky than Longleaf Partners. It trades about 0.14 of its potential returns per unit of risk. Longleaf Partners International is currently generating about 0.02 per unit of risk. If you would invest  2,253  in James Balanced Golden on September 4, 2024 and sell it today you would earn a total of  79.00  from holding James Balanced Golden or generate 3.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

James Balanced Golden  vs.  Longleaf Partners Internationa

James Balanced Golden

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in James Balanced Golden are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental drivers, James Balanced is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Longleaf Partners

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Longleaf Partners International are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Longleaf Partners is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with James Balanced and Longleaf Partners

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

The idea behind James Balanced Golden and Longleaf Partners International 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.

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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.