Correlation Between Davis Commodities and Vanguard Consumer

Can any of the company-specific risk be diversified away by investing in both Davis Commodities and Vanguard Consumer 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 Commodities and Vanguard Consumer into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Davis Commodities Limited and Vanguard Sumer Staples, you can compare the effects of market volatilities on Davis Commodities and Vanguard Consumer 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 Commodities with a short position of Vanguard Consumer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Davis Commodities and Vanguard Consumer.

Diversification Opportunities for Davis Commodities and Vanguard Consumer

-0.68

Correlation Coefficient

Davis Commodities  Vanguard Consumer

Excellent diversification

The 3 months correlation between Davis and Vanguard is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Davis Commodities Limited and Vanguard Sumer Staples in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Sumer Staples and Davis Commodities 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 Commodities Limited are associated (or correlated) with Vanguard Consumer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Sumer Staples has no effect on the direction of Davis Commodities i.e., Davis Commodities and Vanguard Consumer go up and down completely randomly.

Pair Corralation between Davis Commodities and Vanguard Consumer

Given the investment horizon of 90 days Davis Commodities Limited is expected to under-perform the Vanguard Consumer. In addition to that, Davis Commodities is 3.71 times more volatile than Vanguard Sumer Staples. It trades about -0.07 of its total potential returns per unit of risk. Vanguard Sumer Staples is currently generating about 0.05 per unit of volatility. If you would invest  10,405  in Vanguard Sumer Staples on December 29, 2024 and sell it today you would earn a total of  275.00  from holding Vanguard Sumer Staples or generate 2.64% return on investment over 90 days.

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

Davis Commodities Limited  vs.  Vanguard Sumer Staples

Davis Commodities

Risk-Adjusted Performance

Very Weak

Over the last 90 days Davis Commodities Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Vanguard Sumer Staples

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Sumer Staples are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Vanguard Consumer 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 Commodities and Vanguard Consumer

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

The idea behind Davis Commodities Limited and Vanguard Sumer Staples 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.