Correlation Between Davis Financial and Avantis Equity
Can any of the company-specific risk be diversified away by investing in both Davis Financial and Avantis Equity 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 Avantis Equity 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 Avantis Equity, you can compare the effects of market volatilities on Davis Financial and Avantis Equity 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 Avantis Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Davis Financial and Avantis Equity.
Diversification Opportunities for Davis Financial and Avantis Equity
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Davis and Avantis is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Davis Financial Fund and Avantis Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avantis Equity 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 Avantis Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avantis Equity has no effect on the direction of Davis Financial i.e., Davis Financial and Avantis Equity go up and down completely randomly.
Pair Corralation between Davis Financial and Avantis Equity
Assuming the 90 days horizon Davis Financial Fund is expected to generate 1.34 times more return on investment than Avantis Equity. However, Davis Financial is 1.34 times more volatile than Avantis Equity. It trades about 0.36 of its potential returns per unit of risk. Avantis Equity is currently generating about 0.28 per unit of risk. If you would invest 6,641 in Davis Financial Fund on November 2, 2024 and sell it today you would earn a total of 494.00 from holding Davis Financial Fund or generate 7.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Davis Financial Fund vs. Avantis Equity
Performance |
| Timeline |
| Davis Financial |
| Avantis Equity |
Davis Financial and Avantis Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Davis Financial and Avantis Equity
The main advantage of trading using opposite Davis Financial and Avantis Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Davis Financial position performs unexpectedly, Avantis Equity 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 Avantis Equity will offset losses from the drop in Avantis Equity's long position.| Davis Financial vs. City National Rochdale | Davis Financial vs. Gmo High Yield | Davis Financial vs. Fidelity Capital Income | Davis Financial vs. Artisan High Income |
| Avantis Equity vs. Avantis International Small | Avantis Equity vs. American Century Etf | Avantis Equity vs. Avantis International Equity | Avantis Equity vs. American Century Etf |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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