Correlation Between Third Avenue and Tweedy Browne

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

By analyzing existing cross correlation between Third Avenue Small Cap and Tweedy Browne Global, you can compare the effects of market volatilities on Third Avenue and Tweedy Browne 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 Tweedy Browne. Check out your portfolio center. Please also check ongoing floating volatility patterns of Third Avenue and Tweedy Browne.

Diversification Opportunities for Third Avenue and Tweedy Browne

0.16

Correlation Coefficient

Third Avenue  Tweedy Browne

Average diversification

The 3 months correlation between Third and Tweedy is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Third Avenue Small Cap and Tweedy Browne Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tweedy Browne Global 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 Small Cap are associated (or correlated) with Tweedy Browne. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tweedy Browne Global has no effect on the direction of Third Avenue i.e., Third Avenue and Tweedy Browne go up and down completely randomly.

Pair Corralation between Third Avenue and Tweedy Browne

Assuming the 90 days horizon Third Avenue Small Cap is expected to generate 1.39 times more return on investment than Tweedy Browne. However, Third Avenue is 1.39 times more volatile than Tweedy Browne Global. It trades about 0.18 of its potential returns per unit of risk. Tweedy Browne Global is currently generating about -0.02 per unit of risk. If you would invest  2,052  in Third Avenue Small Cap on August 30, 2025 and sell it today you would earn a total of  82.00  from holding Third Avenue Small Cap or generate 4.0% return on investment over 90 days.

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

Third Avenue Small Cap  vs.  Tweedy Browne Global

Third Avenue Small

Risk-Adjusted Performance

Soft

Compared to the overall equity markets, risk-adjusted returns on investments in Third Avenue Small Cap are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Third Avenue is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Tweedy Browne Global

Risk-Adjusted Performance

Soft

Compared to the overall equity markets, risk-adjusted returns on investments in Tweedy Browne Global are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Tweedy Browne 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 Tweedy Browne

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

The idea behind Third Avenue Small Cap and Tweedy Browne Global 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.