Correlation Between Davenport Small and Tax Exempt

Can any of the company-specific risk be diversified away by investing in both Davenport Small and Tax Exempt 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 Tax Exempt 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 Tax Exempt High Yield, you can compare the effects of market volatilities on Davenport Small and Tax Exempt 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 Tax Exempt. Check out your portfolio center. Please also check ongoing floating volatility patterns of Davenport Small and Tax Exempt.

Diversification Opportunities for Davenport Small and Tax Exempt

0.75

Correlation Coefficient

Davenport Small  Tax Exempt

Poor diversification

The 3 months correlation between Davenport and Tax is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Davenport Small Cap and Tax Exempt High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tax Exempt High 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 Tax Exempt. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tax Exempt High has no effect on the direction of Davenport Small i.e., Davenport Small and Tax Exempt go up and down completely randomly.

Pair Corralation between Davenport Small and Tax Exempt

Assuming the 90 days horizon Davenport Small Cap is expected to generate 3.68 times more return on investment than Tax Exempt. However, Davenport Small is 3.68 times more volatile than Tax Exempt High Yield. It trades about 0.02 of its potential returns per unit of risk. Tax Exempt High Yield is currently generating about 0.06 per unit of risk. If you would invest  1,598  in Davenport Small Cap on October 13, 2024 and sell it today you would earn a total of  110.00  from holding Davenport Small Cap or generate 6.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

Davenport Small Cap  vs.  Tax Exempt High Yield

Davenport Small Cap

Risk-Adjusted Performance

0 of 100

Very Weak

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

Tax Exempt High

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tax Exempt High Yield has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Tax Exempt 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 Tax Exempt

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

The idea behind Davenport Small Cap and Tax Exempt High Yield 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.