Correlation Between Davis Select and Dimensional International

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

By analyzing existing cross correlation between Davis Select Equity and Dimensional International High, you can compare the effects of market volatilities on Davis Select and Dimensional International 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 Dimensional International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Davis Select and Dimensional International.

Diversification Opportunities for Davis Select and Dimensional International

-0.33

Correlation Coefficient

Davis Select  Dimensional International

Very good diversification

The 3 months correlation between Davis and Dimensional is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Davis Select Equity and Dimensional International High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dimensional International 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 Equity are associated (or correlated) with Dimensional International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dimensional International has no effect on the direction of Davis Select i.e., Davis Select and Dimensional International go up and down completely randomly.

Pair Corralation between Davis Select and Dimensional International

Given the investment horizon of 90 days Davis Select Equity is expected to under-perform the Dimensional International. In addition to that, Davis Select is 1.29 times more volatile than Dimensional International High. It trades about -0.19 of its total potential returns per unit of risk. Dimensional International High is currently generating about -0.24 per unit of volatility. If you would invest  2,636  in Dimensional International High on October 12, 2024 and sell it today you would lose (86.00) from holding Dimensional International High or give up 3.26% of portfolio value over 90 days.

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

Davis Select Equity  vs.  Dimensional International High

Davis Select Equity

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Davis Select Equity are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Davis Select is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Dimensional International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dimensional International High has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Etf's technical indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the ETF retail investors.

Pair Trading with Davis Select and Dimensional International

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

The idea behind Davis Select Equity and Dimensional International High 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.