Correlation Between Davenport Small and Northern Global

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

By analyzing existing cross correlation between Davenport Small Cap and Northern Global Real, you can compare the effects of market volatilities on Davenport Small and Northern Global 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 Davenport Small with a short position of Northern Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Davenport Small and Northern Global.

Diversification Opportunities for Davenport Small and Northern Global

-0.57

Correlation Coefficient

Davenport Small  Northern Global

Excellent diversification

The 3 months correlation between Davenport and Northern is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Davenport Small Cap and Northern Global Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Global Real and Davenport Small 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 Davenport Small Cap are associated (or correlated) with Northern Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Global Real has no effect on the direction of Davenport Small i.e., Davenport Small and Northern Global go up and down completely randomly.

Pair Corralation between Davenport Small and Northern Global

Assuming the 90 days horizon Davenport Small Cap is expected to generate 1.62 times more return on investment than Northern Global. However, Davenport Small is 1.62 times more volatile than Northern Global Real. It trades about 0.13 of its potential returns per unit of risk. Northern Global Real is currently generating about -0.13 per unit of risk. If you would invest  1,718  in Davenport Small Cap on September 14, 2024 and sell it today you would earn a total of  153.00  from holding Davenport Small Cap or generate 8.91% return on investment over 90 days.

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

Davenport Small Cap  vs.  Northern Global Real

Davenport Small Cap

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Davenport Small Cap are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Davenport Small may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Northern Global Real

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Davenport Small and Northern Global

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

The idea behind Davenport Small Cap and Northern Global Real 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.