Correlation Between Davis Financial and 361 Global

Can any of the company-specific risk be diversified away by investing in both Davis Financial and 361 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 Davis Financial and 361 Global into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Davis Financial Fund and 361 Global Longshort, you can compare the effects of market volatilities on Davis Financial and 361 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 Davis Financial with a short position of 361 Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Davis Financial and 361 Global.

Diversification Opportunities for Davis Financial and 361 Global

0.29

Correlation Coefficient

Davis Financial  361 Global

Modest diversification

The 3 months correlation between Davis and 361 is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Davis Financial Fund and 361 Global Longshort in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 361 Global Longshort and Davis Financial 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 Financial Fund are associated (or correlated) with 361 Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 361 Global Longshort has no effect on the direction of Davis Financial i.e., Davis Financial and 361 Global go up and down completely randomly.

Pair Corralation between Davis Financial and 361 Global

Assuming the 90 days horizon Davis Financial Fund is expected to under-perform the 361 Global. In addition to that, Davis Financial is 1.8 times more volatile than 361 Global Longshort. It trades about -0.27 of its total potential returns per unit of risk. 361 Global Longshort is currently generating about -0.35 per unit of volatility. If you would invest  1,274  in 361 Global Longshort on October 10, 2024 and sell it today you would lose (67.00) from holding 361 Global Longshort or give up 5.26% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Davis Financial Fund  vs.  361 Global Longshort

Davis Financial

Risk-Adjusted Performance

2 of 100

Weak

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

361 Global Longshort

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days 361 Global Longshort has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Davis Financial and 361 Global

The main advantage of trading using opposite Davis Financial and 361 Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Davis Financial position performs unexpectedly, 361 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 361 Global will offset losses from the drop in 361 Global's long position.

The idea behind Davis Financial Fund and 361 Global Longshort 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.