Correlation Between Armada Hflr and Davis Select

Can any of the company-specific risk be diversified away by investing in both Armada Hflr 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 Armada Hflr and Davis Select into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Armada Hflr Pr and Davis Select Worldwide, you can compare the effects of market volatilities on Armada Hflr 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 Armada Hflr with a short position of Davis Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of Armada Hflr and Davis Select.

Diversification Opportunities for Armada Hflr and Davis Select

-0.82

Correlation Coefficient

Armada Hflr  Davis Select

Pay attention - limited upside

The 3 months correlation between Armada and Davis is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Armada Hflr Pr and Davis Select Worldwide in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Davis Select Worldwide and Armada Hflr 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 Armada Hflr Pr 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 Worldwide has no effect on the direction of Armada Hflr i.e., Armada Hflr and Davis Select go up and down completely randomly.

Pair Corralation between Armada Hflr and Davis Select

Considering the 90-day investment horizon Armada Hflr Pr is expected to under-perform the Davis Select. In addition to that, Armada Hflr is 1.03 times more volatile than Davis Select Worldwide. It trades about -0.07 of its total potential returns per unit of risk. Davis Select Worldwide is currently generating about 0.11 per unit of volatility. If you would invest  3,453  in Davis Select Worldwide on September 17, 2024 and sell it today you would earn a total of  342.66  from holding Davis Select Worldwide or generate 9.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

Armada Hflr Pr  vs.  Davis Select Worldwide

Armada Hflr Pr

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Armada Hflr Pr has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Davis Select Worldwide

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Davis Select Worldwide are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent essential indicators, Davis Select may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Armada Hflr and Davis Select

The main advantage of trading using opposite Armada Hflr and Davis Select positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Armada Hflr 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.

The idea behind Armada Hflr Pr and Davis Select Worldwide pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.