Correlation Between Davis Financial and Aqr Global

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

Diversification Opportunities for Davis Financial and Aqr Global

0.24

Correlation Coefficient

Davis Financial  Aqr Global

Modest diversification

The 3 months correlation between Davis and Aqr is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Davis Financial Fund and Aqr Global Macro in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aqr Global Macro 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 Aqr Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aqr Global Macro has no effect on the direction of Davis Financial i.e., Davis Financial and Aqr Global go up and down completely randomly.

Pair Corralation between Davis Financial and Aqr Global

Assuming the 90 days horizon Davis Financial is expected to generate 2.37 times less return on investment than Aqr Global. In addition to that, Davis Financial is 2.39 times more volatile than Aqr Global Macro. It trades about 0.05 of its total potential returns per unit of risk. Aqr Global Macro is currently generating about 0.3 per unit of volatility. If you would invest  934.00  in Aqr Global Macro on December 19, 2024 and sell it today you would earn a total of  82.00  from holding Aqr Global Macro or generate 8.78% return on investment over 90 days.

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

Davis Financial Fund  vs.  Aqr Global Macro

Davis Financial

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Davis Financial Fund are ranked lower than 4 (%) 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.

Aqr Global Macro

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Aqr Global Macro are ranked lower than 23 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Aqr Global may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Davis Financial and Aqr Global

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

The idea behind Davis Financial Fund and Aqr Global Macro 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.