Correlation Between Value Fund and Longleaf Partners

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

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

Diversification Opportunities for Value Fund and Longleaf Partners

0.77

Correlation Coefficient

Value Fund  Longleaf Partners

Poor diversification

The 3 months correlation between Value and Longleaf is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Value Fund Value and Longleaf Partners Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Longleaf Partners and Value Fund 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 Value Fund Value 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 Value Fund i.e., Value Fund and Longleaf Partners go up and down completely randomly.

Pair Corralation between Value Fund and Longleaf Partners

Assuming the 90 days horizon Value Fund Value is expected to generate 1.22 times more return on investment than Longleaf Partners. However, Value Fund is 1.22 times more volatile than Longleaf Partners Fund. It trades about -0.07 of its potential returns per unit of risk. Longleaf Partners Fund is currently generating about -0.1 per unit of risk. If you would invest  5,264  in Value Fund Value on December 30, 2024 and sell it today you would lose (226.00) from holding Value Fund Value or give up 4.29% of portfolio value over 90 days.

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

Value Fund Value  vs.  Longleaf Partners Fund

Value Fund Value

Risk-Adjusted Performance

Very Weak

Over the last 90 days Value Fund Value has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong essential indicators, Value Fund 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

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 Value Fund and Longleaf Partners

The main advantage of trading using opposite Value Fund and Longleaf Partners positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Value Fund 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 Value Fund Value 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.