Correlation Between American Funds and Davis Financial
Can any of the company-specific risk be diversified away by investing in both American Funds 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 American Funds and Davis Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds New and Davis Financial Fund, you can compare the effects of market volatilities on American Funds 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 American Funds with a short position of Davis Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Davis Financial.
Diversification Opportunities for American Funds and Davis Financial
-0.16 | Correlation Coefficient |
Good diversification
The 3 months correlation between American and Davis is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding American Funds New and Davis Financial Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Davis Financial 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 New 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 American Funds i.e., American Funds and Davis Financial go up and down completely randomly.
Pair Corralation between American Funds and Davis Financial
Assuming the 90 days horizon American Funds is expected to generate 18.19 times less return on investment than Davis Financial. But when comparing it to its historical volatility, American Funds New is 1.4 times less risky than Davis Financial. It trades about 0.01 of its potential returns per unit of risk. Davis Financial Fund is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 5,693 in Davis Financial Fund on September 3, 2024 and sell it today you would earn a total of 1,386 from holding Davis Financial Fund or generate 24.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Funds New vs. Davis Financial Fund
Performance |
| Timeline |
| American Funds New |
| Davis Financial |
American Funds and Davis Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Davis Financial
The main advantage of trading using opposite American Funds and Davis Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds 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.| American Funds vs. Oil Gas Ultrasector | American Funds vs. Tortoise Energy Independence | American Funds vs. World Energy Fund | American Funds vs. Icon Natural Resources |
| Davis Financial vs. The Gabelli Small | Davis Financial vs. Northern Small Cap | Davis Financial vs. Pgim Jennison Diversified | Davis Financial vs. Fuller Thaler Behavioral |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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