Correlation Between Selected American and Longleaf Partners

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

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

Diversification Opportunities for Selected American and Longleaf Partners

0.16

Correlation Coefficient

Selected American  Longleaf Partners

Average diversification

The 3 months correlation between Selected and Longleaf is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Selected American Shares and Longleaf Partners Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Longleaf Partners and Selected American 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 Selected American Shares 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 Selected American i.e., Selected American and Longleaf Partners go up and down completely randomly.

Pair Corralation between Selected American and Longleaf Partners

Assuming the 90 days horizon Selected American is expected to generate 4.14 times less return on investment than Longleaf Partners. In addition to that, Selected American is 1.38 times more volatile than Longleaf Partners Fund. It trades about 0.03 of its total potential returns per unit of risk. Longleaf Partners Fund is currently generating about 0.14 per unit of volatility. If you would invest  2,244  in Longleaf Partners Fund on May 1, 2025 and sell it today you would earn a total of  211.00  from holding Longleaf Partners Fund or generate 9.4% return on investment over 90 days.

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

Selected American Shares  vs.  Longleaf Partners Fund

Selected American Shares

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Selected American Shares are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Selected American 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

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Longleaf Partners Fund are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Longleaf Partners may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Selected American and Longleaf Partners

The main advantage of trading using opposite Selected American and Longleaf Partners positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Selected American 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 Selected American Shares 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.