Correlation Between Pacific Funds and Longleaf Partners

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

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

Diversification Opportunities for Pacific Funds and Longleaf Partners

-0.86

Correlation Coefficient

Pacific Funds  Longleaf Partners

Pay attention - limited upside

The 3 months correlation between Pacific and Longleaf is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding Pacific Funds Small Cap and Longleaf Partners Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Longleaf Partners Global and Pacific Funds 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 Pacific Funds Small Cap 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 Global has no effect on the direction of Pacific Funds i.e., Pacific Funds and Longleaf Partners go up and down completely randomly.

Pair Corralation between Pacific Funds and Longleaf Partners

If you would invest  1,366  in Longleaf Partners Global on September 3, 2024 and sell it today you would earn a total of  65.00  from holding Longleaf Partners Global or generate 4.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	1.56%
Values	Daily Returns

Pacific Funds Small Cap  vs.  Longleaf Partners Global

Pacific Funds Small

Risk-Adjusted Performance

0 of 100

Very Weak

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

Longleaf Partners Global

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Longleaf Partners Global are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong essential 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 Pacific Funds and Longleaf Partners

The main advantage of trading using opposite Pacific Funds and Longleaf Partners positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pacific Funds 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 Pacific Funds Small Cap and Longleaf Partners Global 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.