Correlation Between Davis Select and WisdomTree Emerging

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

Diversification Opportunities for Davis Select and WisdomTree Emerging

-0.43

Correlation Coefficient

Davis Select  WisdomTree Emerging

Very good diversification

The 3 months correlation between Davis and WisdomTree is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Davis Select International and WisdomTree Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Emerging 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 WisdomTree Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Emerging has no effect on the direction of Davis Select i.e., Davis Select and WisdomTree Emerging go up and down completely randomly.

Pair Corralation between Davis Select and WisdomTree Emerging

Given the investment horizon of 90 days Davis Select International is expected to generate 1.43 times more return on investment than WisdomTree Emerging. However, Davis Select is 1.43 times more volatile than WisdomTree Emerging Markets. It trades about 0.08 of its potential returns per unit of risk. WisdomTree Emerging Markets is currently generating about -0.05 per unit of risk. If you would invest  2,189  in Davis Select International on December 29, 2024 and sell it today you would earn a total of  142.00  from holding Davis Select International or generate 6.49% 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.  WisdomTree Emerging Markets

Davis Select Interna

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Davis Select International are ranked lower than 6 (%) 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.

WisdomTree Emerging

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Davis Select and WisdomTree Emerging

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

The idea behind Davis Select International and WisdomTree Emerging Markets 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 Stocks Directory module to find actively traded stocks across global markets.