Correlation Between Third Avenue and Multi Manager

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

By analyzing existing cross correlation between Third Avenue Real and Multi Manager Directional Alternative, you can compare the effects of market volatilities on Third Avenue and Multi Manager 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 Multi Manager. Check out your portfolio center. Please also check ongoing floating volatility patterns of Third Avenue and Multi Manager.

Diversification Opportunities for Third Avenue and Multi Manager

0.88

Correlation Coefficient

Third Avenue  Multi Manager

Very poor diversification

The 3 months correlation between Third and Multi is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Third Avenue Real and Multi Manager Directional Alte in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Multi Manager Direct 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 Real are associated (or correlated) with Multi Manager. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Multi Manager Direct has no effect on the direction of Third Avenue i.e., Third Avenue and Multi Manager go up and down completely randomly.

Pair Corralation between Third Avenue and Multi Manager

Assuming the 90 days horizon Third Avenue Real is expected to generate 1.89 times more return on investment than Multi Manager. However, Third Avenue is 1.89 times more volatile than Multi Manager Directional Alternative. It trades about 0.23 of its potential returns per unit of risk. Multi Manager Directional Alternative is currently generating about 0.17 per unit of risk. If you would invest  2,345  in Third Avenue Real on May 22, 2025 and sell it today you would earn a total of  275.00  from holding Third Avenue Real or generate 11.73% return on investment over 90 days.

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

Third Avenue Real  vs.  Multi Manager Directional Alte

Third Avenue Real

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Third Avenue Real are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Third Avenue may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Multi Manager Direct

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Multi Manager Directional Alternative are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Multi Manager is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Third Avenue and Multi Manager

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

The idea behind Third Avenue Real and Multi Manager Directional Alternative 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.