Correlation Between First Trust and Davis Financial
Can any of the company-specific risk be diversified away by investing in both First Trust and Davis Financial 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 First Trust and Davis Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Specialty and Davis Financial Fund, you can compare the effects of market volatilities on First Trust and Davis Financial 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 First Trust with a short position of Davis Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Davis Financial.
Diversification Opportunities for First Trust and Davis Financial
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between First and Davis is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Specialty and Davis Financial Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Davis Financial and First Trust 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 First Trust Specialty are associated (or correlated) with Davis Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Davis Financial has no effect on the direction of First Trust i.e., First Trust and Davis Financial go up and down completely randomly.
Pair Corralation between First Trust and Davis Financial
Considering the 90-day investment horizon First Trust is expected to generate 4.82 times less return on investment than Davis Financial. But when comparing it to its historical volatility, First Trust Specialty is 1.16 times less risky than Davis Financial. It trades about 0.07 of its potential returns per unit of risk. Davis Financial Fund is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest 6,423 in Davis Financial Fund on November 4, 2024 and sell it today you would earn a total of 381.00 from holding Davis Financial Fund or generate 5.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Specialty vs. Davis Financial Fund
Performance |
| Timeline |
| First Trust Specialty |
| Davis Financial |
First Trust and Davis Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and Davis Financial
The main advantage of trading using opposite First Trust and Davis Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Davis Financial 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 Financial will offset losses from the drop in Davis Financial's long position.| First Trust vs. MFS High Income | First Trust vs. MFS High Yield | First Trust vs. Blackrock Muniholdings Quality | First Trust vs. MFS Government Markets |
| Davis Financial vs. Lifestyle Ii Moderate | Davis Financial vs. Columbia Moderate Growth | Davis Financial vs. American Funds Retirement | Davis Financial vs. Wilmington Trust Retirement |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
Other Complementary Tools
| Volatility Analysis Get historical volatility and risk analysis based on latest market data | |
| Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope | |
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets | |
| Instant Ratings Determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk |