Correlation Between Precious Metals and Davis Financial
Can any of the company-specific risk be diversified away by investing in both Precious Metals 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 Precious Metals and Davis Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Precious Metals Fund and Davis Financial Fund, you can compare the effects of market volatilities on Precious Metals 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 Precious Metals with a short position of Davis Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Precious Metals and Davis Financial.
Diversification Opportunities for Precious Metals and Davis Financial
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Precious and Davis is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Precious Metals Fund and Davis Financial Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Davis Financial and Precious Metals 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 Precious Metals Fund 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 Precious Metals i.e., Precious Metals and Davis Financial go up and down completely randomly.
Pair Corralation between Precious Metals and Davis Financial
Assuming the 90 days horizon Precious Metals Fund is expected to generate 2.04 times more return on investment than Davis Financial. However, Precious Metals is 2.04 times more volatile than Davis Financial Fund. It trades about 0.17 of its potential returns per unit of risk. Davis Financial Fund is currently generating about 0.2 per unit of risk. If you would invest 10,353 in Precious Metals Fund on November 30, 2024 and sell it today you would earn a total of 1,421 from holding Precious Metals Fund or generate 13.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Precious Metals Fund vs. Davis Financial Fund
Performance |
| Timeline |
| Precious Metals |
| Davis Financial |
Precious Metals and Davis Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Precious Metals and Davis Financial
The main advantage of trading using opposite Precious Metals and Davis Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Precious Metals 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.| Precious Metals vs. Gmo High Yield | Precious Metals vs. Dunham High Yield | Precious Metals vs. Siit High Yield | Precious Metals vs. Buffalo High Yield |
| Davis Financial vs. Transamerica International Small | Davis Financial vs. Small Midcap Dividend Income | Davis Financial vs. Nuveen Small Cap | Davis Financial vs. Artisan 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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