Correlation Between Davis Financial and Absolute Convertible
Can any of the company-specific risk be diversified away by investing in both Davis Financial and Absolute Convertible 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 Davis Financial and Absolute Convertible into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Davis Financial Fund and Absolute Convertible Arbitrage, you can compare the effects of market volatilities on Davis Financial and Absolute Convertible 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 Davis Financial with a short position of Absolute Convertible. Check out your portfolio center. Please also check ongoing floating volatility patterns of Davis Financial and Absolute Convertible.
Diversification Opportunities for Davis Financial and Absolute Convertible
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Davis and Absolute is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Davis Financial Fund and Absolute Convertible Arbitrage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Absolute Convertible and Davis Financial 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 Davis Financial Fund are associated (or correlated) with Absolute Convertible. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Absolute Convertible has no effect on the direction of Davis Financial i.e., Davis Financial and Absolute Convertible go up and down completely randomly.
Pair Corralation between Davis Financial and Absolute Convertible
Assuming the 90 days horizon Davis Financial Fund is expected to generate 16.9 times more return on investment than Absolute Convertible. However, Davis Financial is 16.9 times more volatile than Absolute Convertible Arbitrage. It trades about 0.07 of its potential returns per unit of risk. Absolute Convertible Arbitrage is currently generating about 0.37 per unit of risk. If you would invest 3,630 in Davis Financial Fund on September 12, 2024 and sell it today you would earn a total of 1,648 from holding Davis Financial Fund or generate 45.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Davis Financial Fund vs. Absolute Convertible Arbitrage
Performance |
| Timeline |
| Davis Financial |
| Absolute Convertible |
Davis Financial and Absolute Convertible Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Davis Financial and Absolute Convertible
The main advantage of trading using opposite Davis Financial and Absolute Convertible positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Davis Financial position performs unexpectedly, Absolute Convertible 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 Absolute Convertible will offset losses from the drop in Absolute Convertible's long position.| Davis Financial vs. Valic Company I | Davis Financial vs. Ab Discovery Value | Davis Financial vs. Applied Finance Explorer | Davis Financial vs. Lsv Small Cap |
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Check out your portfolio center.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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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