Correlation Between Davis Financial and Calamos High

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

Diversification Opportunities for Davis Financial and Calamos High

0.83

Correlation Coefficient

Davis Financial  Calamos High

Very poor diversification

The 3 months correlation between Davis and Calamos is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Davis Financial Fund and Calamos High Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Calamos High Income 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 Calamos High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Calamos High Income has no effect on the direction of Davis Financial i.e., Davis Financial and Calamos High go up and down completely randomly.

Pair Corralation between Davis Financial and Calamos High

Assuming the 90 days horizon Davis Financial Fund is expected to generate 7.33 times more return on investment than Calamos High. However, Davis Financial is 7.33 times more volatile than Calamos High Income. It trades about 0.08 of its potential returns per unit of risk. Calamos High Income is currently generating about 0.1 per unit of risk. If you would invest  6,652  in Davis Financial Fund on December 29, 2024 and sell it today you would earn a total of  327.00  from holding Davis Financial Fund or generate 4.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.39%
Values	Daily Returns

Davis Financial Fund  vs.  Calamos High Income

Davis Financial

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Davis Financial Fund are ranked lower than 5 (%) 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.

Calamos High Income

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Calamos High Income are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Calamos High 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 Financial and Calamos High

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

The idea behind Davis Financial Fund and Calamos High Income 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 Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .