Correlation Between Davis Financial and Western Asset
Can any of the company-specific risk be diversified away by investing in both Davis Financial and Western Asset 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 Western Asset 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 Western Asset Smash, you can compare the effects of market volatilities on Davis Financial and Western Asset 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 Western Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Davis Financial and Western Asset.
Diversification Opportunities for Davis Financial and Western Asset
-0.8 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between DAVIS and Western is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Davis Financial Fund and Western Asset Smash in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset Smash 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 Western Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Asset Smash has no effect on the direction of Davis Financial i.e., Davis Financial and Western Asset go up and down completely randomly.
Pair Corralation between Davis Financial and Western Asset
Assuming the 90 days horizon Davis Financial Fund is expected to generate 2.13 times more return on investment than Western Asset. However, Davis Financial is 2.13 times more volatile than Western Asset Smash. It trades about 0.14 of its potential returns per unit of risk. Western Asset Smash is currently generating about 0.06 per unit of risk. If you would invest 5,007 in Davis Financial Fund on September 2, 2024 and sell it today you would earn a total of 2,072 from holding Davis Financial Fund or generate 41.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Davis Financial Fund vs. Western Asset Smash
Performance |
| Timeline |
| Davis Financial |
| Western Asset Smash |
Davis Financial and Western Asset Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Davis Financial and Western Asset
The main advantage of trading using opposite Davis Financial and Western Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Davis Financial position performs unexpectedly, Western Asset 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 Western Asset will offset losses from the drop in Western Asset's long position.| Davis Financial vs. Baillie Gifford Health | Davis Financial vs. Allianzgi Health Sciences | Davis Financial vs. Lord Abbett Health | Davis Financial vs. Invesco Global Health |
| Western Asset vs. Clearbridge Aggressive Growth | Western Asset vs. Clearbridge Small Cap | Western Asset vs. Qs International Equity | Western Asset vs. Clearbridge Appreciation Fund |
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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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