Correlation Between Davis Real and Guidemark(r) Core

Can any of the company-specific risk be diversified away by investing in both Davis Real and Guidemark(r) Core 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 Real and Guidemark(r) Core into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Davis Real Estate and Guidemark E Fixed, you can compare the effects of market volatilities on Davis Real and Guidemark(r) Core 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 Real with a short position of Guidemark(r) Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of Davis Real and Guidemark(r) Core.

Diversification Opportunities for Davis Real and Guidemark(r) Core

0.71

Correlation Coefficient

Davis Real  Guidemark(r) Core

Poor diversification

The 3 months correlation between Davis and Guidemark(r) is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Davis Real Estate and Guidemark E Fixed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guidemark E Fixed and Davis Real 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 Real Estate are associated (or correlated) with Guidemark(r) Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guidemark E Fixed has no effect on the direction of Davis Real i.e., Davis Real and Guidemark(r) Core go up and down completely randomly.

Pair Corralation between Davis Real and Guidemark(r) Core

Assuming the 90 days horizon Davis Real Estate is expected to under-perform the Guidemark(r) Core. In addition to that, Davis Real is 3.48 times more volatile than Guidemark E Fixed. It trades about -0.14 of its total potential returns per unit of risk. Guidemark E Fixed is currently generating about -0.13 per unit of volatility. If you would invest  824.00  in Guidemark E Fixed on October 6, 2024 and sell it today you would lose (15.00) from holding Guidemark E Fixed or give up 1.82% of portfolio value over 90 days.

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

Davis Real Estate  vs.  Guidemark E Fixed

Davis Real Estate

Risk-Adjusted Performance

0 of 100

Very Weak

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

Guidemark E Fixed

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Guidemark E Fixed has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Guidemark(r) Core is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Davis Real and Guidemark(r) Core

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

The idea behind Davis Real Estate and Guidemark E Fixed 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.