Correlation Between Undiscovered Managers and Third Avenue

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

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

Diversification Opportunities for Undiscovered Managers and Third Avenue

0.88

Correlation Coefficient

Undiscovered Managers  Third Avenue

Very poor diversification

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

Pair Corralation between Undiscovered Managers and Third Avenue

Assuming the 90 days horizon Undiscovered Managers is expected to generate 1.07 times less return on investment than Third Avenue. In addition to that, Undiscovered Managers is 1.28 times more volatile than Third Avenue Small Cap. It trades about 0.1 of its total potential returns per unit of risk. Third Avenue Small Cap is currently generating about 0.13 per unit of volatility. If you would invest  1,792  in Third Avenue Small Cap on May 2, 2025 and sell it today you would earn a total of  145.00  from holding Third Avenue Small Cap or generate 8.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.39%
Values	Daily Returns

Undiscovered Managers Behavior  vs.  Third Avenue Small Cap

Undiscovered Managers

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Undiscovered Managers Behavioral are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Undiscovered Managers may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Third Avenue Small

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Third Avenue Small Cap are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Third Avenue may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Undiscovered Managers and Third Avenue

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

The idea behind Undiscovered Managers Behavioral and Third Avenue Small Cap 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.