Correlation Between Tweedy Browne and Longleaf Partners

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

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

Diversification Opportunities for Tweedy Browne and Longleaf Partners

0.86

Correlation Coefficient

Tweedy Browne  Longleaf Partners

Very poor diversification

The 3 months correlation between TWEEDY and Longleaf is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Tweedy Browne Global and Longleaf Partners Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Longleaf Partners and Tweedy Browne 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 Tweedy Browne Global 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 Tweedy Browne i.e., Tweedy Browne and Longleaf Partners go up and down completely randomly.

Pair Corralation between Tweedy Browne and Longleaf Partners

Assuming the 90 days horizon Tweedy Browne Global is expected to generate 0.87 times more return on investment than Longleaf Partners. However, Tweedy Browne Global is 1.15 times less risky than Longleaf Partners. It trades about 0.32 of its potential returns per unit of risk. Longleaf Partners Fund is currently generating about -0.14 per unit of risk. If you would invest  2,543  in Tweedy Browne Global on October 26, 2024 and sell it today you would earn a total of  69.00  from holding Tweedy Browne Global or generate 2.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	94.74%
Values	Daily Returns

Tweedy Browne Global  vs.  Longleaf Partners Fund

Tweedy Browne Global

Risk-Adjusted Performance

0 of 100

Very Weak

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

Longleaf Partners

Risk-Adjusted Performance

0 of 100

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.

Pair Trading with Tweedy Browne and Longleaf Partners

The main advantage of trading using opposite Tweedy Browne and Longleaf Partners positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tweedy Browne 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 Tweedy Browne Global and Longleaf Partners Fund 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.