Correlation Between Davidson Multi-cap and Schwartz Value

Can any of the company-specific risk be diversified away by investing in both Davidson Multi-cap and Schwartz Value 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 Schwartz Value 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 Schwartz Value Focused, you can compare the effects of market volatilities on Davidson Multi-cap and Schwartz Value 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 Schwartz Value. Check out your portfolio center. Please also check ongoing floating volatility patterns of Davidson Multi-cap and Schwartz Value.

Diversification Opportunities for Davidson Multi-cap and Schwartz Value

0.2

Correlation Coefficient

Davidson Multi-cap  Schwartz Value

Modest diversification

The 3 months correlation between Davidson and Schwartz is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Davidson Multi Cap Equity and Schwartz Value Focused in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schwartz Value Focused 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 Schwartz Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Schwartz Value Focused has no effect on the direction of Davidson Multi-cap i.e., Davidson Multi-cap and Schwartz Value go up and down completely randomly.

Pair Corralation between Davidson Multi-cap and Schwartz Value

Assuming the 90 days horizon Davidson Multi Cap Equity is expected to under-perform the Schwartz Value. But the mutual fund apears to be less risky and, when comparing its historical volatility, Davidson Multi Cap Equity is 1.45 times less risky than Schwartz Value. The mutual fund trades about -0.08 of its potential returns per unit of risk. The Schwartz Value Focused is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  5,273  in Schwartz Value Focused on December 31, 2024 and sell it today you would earn a total of  391.00  from holding Schwartz Value Focused or generate 7.42% return on investment over 90 days.

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

Davidson Multi Cap Equity  vs.  Schwartz Value Focused

Davidson Multi Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Davidson Multi Cap Equity has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Davidson Multi-cap is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Schwartz Value Focused

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Schwartz Value Focused are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Schwartz Value may actually be approaching a critical reversion point that can send shares even higher in May 2025.

Pair Trading with Davidson Multi-cap and Schwartz Value

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

The idea behind Davidson Multi Cap Equity and Schwartz Value Focused 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.

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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.