Correlation Between Davis Financial and Fidelity Series

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

Diversification Opportunities for Davis Financial and Fidelity Series

0.45

Correlation Coefficient

Davis Financial  Fidelity Series

Very weak diversification

The 3 months correlation between Davis and Fidelity is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Davis Financial Fund and Fidelity Series Blue in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Series Blue 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 Fidelity Series. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Series Blue has no effect on the direction of Davis Financial i.e., Davis Financial and Fidelity Series go up and down completely randomly.

Pair Corralation between Davis Financial and Fidelity Series

Assuming the 90 days horizon Davis Financial is expected to generate 1.46 times less return on investment than Fidelity Series. But when comparing it to its historical volatility, Davis Financial Fund is 1.24 times less risky than Fidelity Series. It trades about 0.1 of its potential returns per unit of risk. Fidelity Series Blue is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1,437  in Fidelity Series Blue on October 9, 2024 and sell it today you would earn a total of  624.00  from holding Fidelity Series Blue or generate 43.42% return on investment over 90 days.

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

Davis Financial Fund  vs.  Fidelity Series Blue

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.

Fidelity Series Blue

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Series Blue are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Fidelity Series may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Davis Financial and Fidelity Series

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

The idea behind Davis Financial Fund and Fidelity Series Blue 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.