Correlation Between Davis Select and FT Vest

Can any of the company-specific risk be diversified away by investing in both Davis Select and FT Vest 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 FT Vest 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 FT Vest SMID, you can compare the effects of market volatilities on Davis Select and FT Vest 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 FT Vest. Check out your portfolio center. Please also check ongoing floating volatility patterns of Davis Select and FT Vest.

Diversification Opportunities for Davis Select and FT Vest

-0.44

Correlation Coefficient

Davis Select  FT Vest

Very good diversification

The 3 months correlation between Davis and SDVD is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Davis Select International and FT Vest SMID in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FT Vest SMID 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 FT Vest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FT Vest SMID has no effect on the direction of Davis Select i.e., Davis Select and FT Vest go up and down completely randomly.

Pair Corralation between Davis Select and FT Vest

Given the investment horizon of 90 days Davis Select International is expected to generate 1.3 times more return on investment than FT Vest. However, Davis Select is 1.3 times more volatile than FT Vest SMID. It trades about 0.13 of its potential returns per unit of risk. FT Vest SMID is currently generating about -0.07 per unit of risk. If you would invest  2,203  in Davis Select International on December 19, 2024 and sell it today you would earn a total of  229.00  from holding Davis Select International or generate 10.39% return on investment over 90 days.

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

Davis Select International  vs.  FT Vest SMID

Davis Select Interna

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Davis Select International are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Davis Select may actually be approaching a critical reversion point that can send shares even higher in April 2025.

FT Vest SMID

Risk-Adjusted Performance

Very Weak

Over the last 90 days FT Vest SMID has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, FT Vest is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Davis Select and FT Vest

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

The idea behind Davis Select International and FT Vest SMID 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.