Correlation Between Longleaf Partners and Clipper Fund

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

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

Diversification Opportunities for Longleaf Partners and Clipper Fund

0.34

Correlation Coefficient

Longleaf Partners  Clipper Fund

Weak diversification

The 3 months correlation between Longleaf and Clipper is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Longleaf Partners Fund and Clipper Fund Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clipper Fund and Longleaf Partners 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 Longleaf Partners Fund are associated (or correlated) with Clipper Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clipper Fund has no effect on the direction of Longleaf Partners i.e., Longleaf Partners and Clipper Fund go up and down completely randomly.

Pair Corralation between Longleaf Partners and Clipper Fund

Assuming the 90 days horizon Longleaf Partners Fund is expected to under-perform the Clipper Fund. But the mutual fund apears to be less risky and, when comparing its historical volatility, Longleaf Partners Fund is 1.26 times less risky than Clipper Fund. The mutual fund trades about -0.1 of its potential returns per unit of risk. The Clipper Fund Inc is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  13,619  in Clipper Fund Inc on December 30, 2024 and sell it today you would earn a total of  114.00  from holding Clipper Fund Inc or generate 0.84% return on investment over 90 days.

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

Longleaf Partners Fund  vs.  Clipper Fund Inc

Longleaf Partners

Risk-Adjusted Performance

Very Weak

Over the last 90 days Longleaf Partners Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Longleaf Partners is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Clipper Fund

Risk-Adjusted Performance

Weak

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

Pair Trading with Longleaf Partners and Clipper Fund

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

The idea behind Longleaf Partners Fund and Clipper Fund Inc 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.