Correlation Between Davis Financial and Thornburg Low

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

Diversification Opportunities for Davis Financial and Thornburg Low

0.2

Correlation Coefficient

Davis Financial  Thornburg Low

Modest diversification

The 3 months correlation between Davis and Thornburg is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Davis Financial Fund and Thornburg Low Duration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thornburg Low Duration 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 Thornburg Low. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thornburg Low Duration has no effect on the direction of Davis Financial i.e., Davis Financial and Thornburg Low go up and down completely randomly.

Pair Corralation between Davis Financial and Thornburg Low

Assuming the 90 days horizon Davis Financial Fund is expected to generate 11.21 times more return on investment than Thornburg Low. However, Davis Financial is 11.21 times more volatile than Thornburg Low Duration. It trades about 0.06 of its potential returns per unit of risk. Thornburg Low Duration is currently generating about 0.21 per unit of risk. If you would invest  6,676  in Davis Financial Fund on December 21, 2024 and sell it today you would earn a total of  231.00  from holding Davis Financial Fund or generate 3.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

Davis Financial Fund  vs.  Thornburg Low Duration

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.

Thornburg Low Duration

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Thornburg Low Duration are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Thornburg Low 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 Thornburg Low

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

The idea behind Davis Financial Fund and Thornburg Low Duration 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.