Correlation Between Davis Financial and First Trust
Can any of the company-specific risk be diversified away by investing in both Davis Financial and First Trust 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 First Trust 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 First Trust Specialty, you can compare the effects of market volatilities on Davis Financial and First Trust 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 First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Davis Financial and First Trust.
Diversification Opportunities for Davis Financial and First Trust
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Davis and First is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Davis Financial Fund and First Trust Specialty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Specialty 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 First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Specialty has no effect on the direction of Davis Financial i.e., Davis Financial and First Trust go up and down completely randomly.
Pair Corralation between Davis Financial and First Trust
Assuming the 90 days horizon Davis Financial Fund is expected to generate 1.16 times more return on investment than First Trust. However, Davis Financial is 1.16 times more volatile than First Trust Specialty. It trades about 0.28 of its potential returns per unit of risk. First Trust Specialty is currently generating about 0.07 per unit of risk. 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 |
Davis Financial Fund vs. First Trust Specialty
Performance |
| Timeline |
| Davis Financial |
| First Trust Specialty |
Davis Financial and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Davis Financial and First Trust
The main advantage of trading using opposite Davis Financial and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Davis Financial position performs unexpectedly, First Trust 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 First Trust will offset losses from the drop in First Trust's long position.| Davis Financial vs. Lifestyle Ii Moderate | Davis Financial vs. Columbia Moderate Growth | Davis Financial vs. American Funds Retirement | Davis Financial vs. Wilmington Trust Retirement |
| First Trust vs. MFS High Income | First Trust vs. MFS High Yield | First Trust vs. Blackrock Muniholdings Quality | First Trust vs. MFS Government Markets |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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