Correlation Between Davis International and Shelton International

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

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

Diversification Opportunities for Davis International and Shelton International

0.9

Correlation Coefficient

Davis International  Shelton International

Almost no diversification

The 3 months correlation between Davis and Shelton is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Davis International Fund and Shelton International Select in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shelton International and Davis International 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 International Fund are associated (or correlated) with Shelton International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shelton International has no effect on the direction of Davis International i.e., Davis International and Shelton International go up and down completely randomly.

Pair Corralation between Davis International and Shelton International

Assuming the 90 days horizon Davis International Fund is expected to generate 1.74 times more return on investment than Shelton International. However, Davis International is 1.74 times more volatile than Shelton International Select. It trades about 0.07 of its potential returns per unit of risk. Shelton International Select is currently generating about -0.01 per unit of risk. If you would invest  1,095  in Davis International Fund on October 12, 2024 and sell it today you would earn a total of  178.00  from holding Davis International Fund or generate 16.26% return on investment over 90 days.

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

Davis International Fund  vs.  Shelton International Select

Davis International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Davis International Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Shelton International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shelton International Select has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's essential indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Davis International and Shelton International

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

The idea behind Davis International Fund and Shelton International Select 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.