Correlation Between First Trust and Davis Select
Can any of the company-specific risk be diversified away by investing in both First Trust and Davis Select 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 Select into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust International and Davis Select International, you can compare the effects of market volatilities on First Trust and Davis Select 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 Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Davis Select.
Diversification Opportunities for First Trust and Davis Select
-0.04 | Correlation Coefficient |
Good diversification
The 3 months correlation between First and Davis is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding First Trust International and Davis Select International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Davis Select Interna 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 International are associated (or correlated) with Davis Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Davis Select Interna has no effect on the direction of First Trust i.e., First Trust and Davis Select go up and down completely randomly.
Pair Corralation between First Trust and Davis Select
Given the investment horizon of 90 days First Trust International is expected to generate 0.61 times more return on investment than Davis Select. However, First Trust International is 1.64 times less risky than Davis Select. It trades about -0.17 of its potential returns per unit of risk. Davis Select International is currently generating about -0.13 per unit of risk. If you would invest 3,635 in First Trust International on August 28, 2024 and sell it today you would lose (115.00) from holding First Trust International or give up 3.16% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
First Trust International vs. Davis Select International
Performance |
| Timeline |
| First Trust International |
| Davis Select Interna |
First Trust and Davis Select Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and Davis Select
The main advantage of trading using opposite First Trust and Davis Select positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Davis Select 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 Select will offset losses from the drop in Davis Select's long position.| First Trust vs. Freedom Day Dividend | First Trust vs. Davis Select International | First Trust vs. iShares MSCI China | First Trust vs. SmartETFs Dividend Builder |
| Davis Select vs. Dimensional Core Equity | Davis Select vs. Dimensional Emerging Core | Davis Select vs. Dimensional Targeted Value | Davis Select vs. Dimensional 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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