Correlation Between Davis Select and First Trust
Can any of the company-specific risk be diversified away by investing in both Davis Select and First Trust 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 Select and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Davis Select International and First Trust Switzerland, you can compare the effects of market volatilities on Davis Select and First Trust 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 Select with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Davis Select and First Trust.
Diversification Opportunities for Davis Select and First Trust
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Davis and First is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Davis Select International and First Trust Switzerland in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Switzerland and Davis Select 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 Select International are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Switzerland has no effect on the direction of Davis Select i.e., Davis Select and First Trust go up and down completely randomly.
Pair Corralation between Davis Select and First Trust
Given the investment horizon of 90 days Davis Select International is expected to under-perform the First Trust. In addition to that, Davis Select is 1.22 times more volatile than First Trust Switzerland. It trades about -0.07 of its total potential returns per unit of risk. First Trust Switzerland is currently generating about 0.2 per unit of volatility. If you would invest 6,340 in First Trust Switzerland on October 25, 2024 and sell it today you would earn a total of 210.00 from holding First Trust Switzerland or generate 3.31% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Davis Select International vs. First Trust Switzerland
Performance |
Timeline |
Davis Select Interna |
First Trust Switzerland |
Davis Select and First Trust Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Davis Select and First Trust
The main advantage of trading using opposite Davis Select and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Davis Select position performs unexpectedly, First Trust 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 First Trust will offset losses from the drop in First Trust's long position.Davis Select vs. Davis Select Worldwide | Davis Select vs. Davis Select Financial | Davis Select vs. First Trust Dorsey |
First Trust vs. Davis Select International | First Trust vs. Tidal ETF Trust | First Trust vs. Principal Value ETF | First Trust vs. WisdomTree Emerging Markets |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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