Correlation Between Davis Select and Litman Gregory
Can any of the company-specific risk be diversified away by investing in both Davis Select and Litman Gregory 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 Select and Litman Gregory into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Davis Select International and Litman Gregory Funds, you can compare the effects of market volatilities on Davis Select and Litman Gregory 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 Select with a short position of Litman Gregory. Check out your portfolio center. Please also check ongoing floating volatility patterns of Davis Select and Litman Gregory.
Diversification Opportunities for Davis Select and Litman Gregory
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Davis and Litman is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Davis Select International and Litman Gregory Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Litman Gregory Funds and Davis Select 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 Select International are associated (or correlated) with Litman Gregory. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Litman Gregory Funds has no effect on the direction of Davis Select i.e., Davis Select and Litman Gregory go up and down completely randomly.
Pair Corralation between Davis Select and Litman Gregory
Given the investment horizon of 90 days Davis Select International is expected to generate 0.7 times more return on investment than Litman Gregory. However, Davis Select International is 1.43 times less risky than Litman Gregory. It trades about -0.14 of its potential returns per unit of risk. Litman Gregory Funds is currently generating about -0.17 per unit of risk. If you would invest 2,423 in Davis Select International on August 29, 2024 and sell it today you would lose (113.00) from holding Davis Select International or give up 4.66% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Davis Select International vs. Litman Gregory Funds
Performance |
| Timeline |
| Davis Select Interna |
| Litman Gregory Funds |
Davis Select and Litman Gregory Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Davis Select and Litman Gregory
The main advantage of trading using opposite Davis Select and Litman Gregory positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Davis Select position performs unexpectedly, Litman Gregory 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 Litman Gregory will offset losses from the drop in Litman Gregory's long position.| Davis Select vs. Dimensional Core Equity | Davis Select vs. Dimensional Emerging Core | Davis Select vs. Dimensional Targeted Value | Davis Select vs. Dimensional Small Cap |
| Litman Gregory vs. iShares MSCI Singapore | Litman Gregory vs. iShares MSCI Malaysia | Litman Gregory vs. iShares MSCI Australia | Litman Gregory vs. iShares MSCI South |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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