Correlation Between Davidson Multi-cap and Geneva Smid

Can any of the company-specific risk be diversified away by investing in both Davidson Multi-cap and Geneva Smid 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 Davidson Multi-cap and Geneva Smid into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Davidson Multi Cap Equity and Geneva Smid Cap, you can compare the effects of market volatilities on Davidson Multi-cap and Geneva Smid 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 Davidson Multi-cap with a short position of Geneva Smid. Check out your portfolio center. Please also check ongoing floating volatility patterns of Davidson Multi-cap and Geneva Smid.

Diversification Opportunities for Davidson Multi-cap and Geneva Smid

0.97

Correlation Coefficient

Davidson Multi-cap  Geneva Smid

Almost no diversification

The 3 months correlation between Davidson and Geneva is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Davidson Multi Cap Equity and Geneva Smid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Geneva Smid Cap and Davidson Multi-cap 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 Davidson Multi Cap Equity are associated (or correlated) with Geneva Smid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Geneva Smid Cap has no effect on the direction of Davidson Multi-cap i.e., Davidson Multi-cap and Geneva Smid go up and down completely randomly.

Pair Corralation between Davidson Multi-cap and Geneva Smid

Assuming the 90 days horizon Davidson Multi-cap is expected to generate 1.15 times less return on investment than Geneva Smid. But when comparing it to its historical volatility, Davidson Multi Cap Equity is 1.37 times less risky than Geneva Smid. It trades about 0.09 of its potential returns per unit of risk. Geneva Smid Cap is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  771.00  in Geneva Smid Cap on September 5, 2024 and sell it today you would earn a total of  361.00  from holding Geneva Smid Cap or generate 46.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Davidson Multi Cap Equity  vs.  Geneva Smid Cap

Davidson Multi Cap

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Davidson Multi Cap Equity are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Davidson Multi-cap may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Geneva Smid Cap

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Geneva Smid Cap are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Geneva Smid showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Davidson Multi-cap and Geneva Smid

The main advantage of trading using opposite Davidson Multi-cap and Geneva Smid positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Davidson Multi-cap position performs unexpectedly, Geneva Smid 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 Geneva Smid will offset losses from the drop in Geneva Smid's long position.

The idea behind Davidson Multi Cap Equity and Geneva Smid Cap 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.