Correlation Between American Funds and Davis New

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Can any of the company-specific risk be diversified away by investing in both American Funds and Davis New 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 American Funds and Davis New into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds American and Davis New York, you can compare the effects of market volatilities on American Funds and Davis New 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 American Funds with a short position of Davis New. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Davis New.

Diversification Opportunities for American Funds and Davis New

AmericanDavisDiversified AwayAmericanDavisDiversified Away100%
0.93
  Correlation Coefficient

Almost no diversification

The 3 months correlation between American and Davis is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding American Funds American and Davis New York in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Davis New York and American Funds 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 American Funds American are associated (or correlated) with Davis New. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Davis New York has no effect on the direction of American Funds i.e., American Funds and Davis New go up and down completely randomly.

Pair Corralation between American Funds and Davis New

Assuming the 90 days horizon American Funds American is expected to generate 0.57 times more return on investment than Davis New. However, American Funds American is 1.76 times less risky than Davis New. It trades about 0.08 of its potential returns per unit of risk. Davis New York is currently generating about 0.04 per unit of risk. If you would invest  4,613  in American Funds American on November 19, 2024 and sell it today you would earn a total of  1,196  from holding American Funds American or generate 25.93% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

American Funds American  vs.  Davis New York

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -15-10-50
JavaScript chart by amCharts 3.21.15FFMMX DNVYX
       Timeline  
American Funds American 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days American Funds American has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong primary indicators, American Funds is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb555657585960
Davis New York 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Davis New York has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Davis New is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb2728293031

American Funds and Davis New Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-1.35-1.0-0.65-0.3-0.02280.210.560.911.261.61 0.10.20.30.40.5
JavaScript chart by amCharts 3.21.15FFMMX DNVYX
       Returns  

Pair Trading with American Funds and Davis New

The main advantage of trading using opposite American Funds and Davis New positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Davis New 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 Davis New will offset losses from the drop in Davis New's long position.
The idea behind American Funds American and Davis New York 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.

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