Correlation Between Davis Financial and Sterling Capital
Can any of the company-specific risk be diversified away by investing in both Davis Financial and Sterling Capital 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 Sterling Capital 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 Sterling Capital Virginia, you can compare the effects of market volatilities on Davis Financial and Sterling Capital 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 Sterling Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Davis Financial and Sterling Capital.
Diversification Opportunities for Davis Financial and Sterling Capital
-0.64 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Davis and Sterling is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Davis Financial Fund and Sterling Capital Virginia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sterling Capital Virginia 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 Sterling Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sterling Capital Virginia has no effect on the direction of Davis Financial i.e., Davis Financial and Sterling Capital go up and down completely randomly.
Pair Corralation between Davis Financial and Sterling Capital
Assuming the 90 days horizon Davis Financial Fund is expected to generate 6.38 times more return on investment than Sterling Capital. However, Davis Financial is 6.38 times more volatile than Sterling Capital Virginia. It trades about 0.08 of its potential returns per unit of risk. Sterling Capital Virginia is currently generating about 0.03 per unit of risk. If you would invest 4,886 in Davis Financial Fund on September 3, 2024 and sell it today you would earn a total of 2,500 from holding Davis Financial Fund or generate 51.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Davis Financial Fund vs. Sterling Capital Virginia
Performance |
| Timeline |
| Davis Financial |
| Sterling Capital Virginia |
Davis Financial and Sterling Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Davis Financial and Sterling Capital
The main advantage of trading using opposite Davis Financial and Sterling Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Davis Financial position performs unexpectedly, Sterling Capital 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 Sterling Capital will offset losses from the drop in Sterling Capital's long position.| Davis Financial vs. Elfun Government Money | Davis Financial vs. Matson Money Equity | Davis Financial vs. Dws Government Money | Davis Financial vs. Janus Investment |
| Sterling Capital vs. Tax Managed Mid Small | Sterling Capital vs. Baird Smallmid Cap | Sterling Capital vs. Artisan Small Cap | Sterling Capital vs. Ab Small Cap |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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