Correlation Between Third Avenue and Muhlenkamp Fund

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

By analyzing existing cross correlation between Third Avenue Value and Muhlenkamp Fund Institutional, you can compare the effects of market volatilities on Third Avenue and Muhlenkamp 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 Third Avenue with a short position of Muhlenkamp Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Third Avenue and Muhlenkamp Fund.

Diversification Opportunities for Third Avenue and Muhlenkamp Fund

0.8

Correlation Coefficient

Third Avenue  Muhlenkamp Fund

Very poor diversification

The 3 months correlation between Third and Muhlenkamp is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Third Avenue Value and Muhlenkamp Fund Institutional in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Muhlenkamp Fund Inst 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 Value are associated (or correlated) with Muhlenkamp Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Muhlenkamp Fund Inst has no effect on the direction of Third Avenue i.e., Third Avenue and Muhlenkamp Fund go up and down completely randomly.

Pair Corralation between Third Avenue and Muhlenkamp Fund

Assuming the 90 days horizon Third Avenue Value is expected to generate 0.88 times more return on investment than Muhlenkamp Fund. However, Third Avenue Value is 1.13 times less risky than Muhlenkamp Fund. It trades about -0.1 of its potential returns per unit of risk. Muhlenkamp Fund Institutional is currently generating about -0.14 per unit of risk. If you would invest  6,366  in Third Avenue Value on December 1, 2024 and sell it today you would lose (442.00) from holding Third Avenue Value or give up 6.94% of portfolio value over 90 days.

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

Third Avenue Value  vs.  Muhlenkamp Fund Institutional

Third Avenue Value

Risk-Adjusted Performance

Very Weak

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

Muhlenkamp Fund Inst

Risk-Adjusted Performance

Very Weak

Over the last 90 days Muhlenkamp Fund Institutional has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's essential 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 Third Avenue and Muhlenkamp Fund

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

The idea behind Third Avenue Value and Muhlenkamp Fund Institutional 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.