Correlation Between Janus Balanced and Davidson Multi-cap

Can any of the company-specific risk be diversified away by investing in both Janus Balanced and Davidson Multi-cap 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 Janus Balanced and Davidson Multi-cap into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Janus Balanced Fund and Davidson Multi Cap Equity, you can compare the effects of market volatilities on Janus Balanced and Davidson Multi-cap 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 Janus Balanced with a short position of Davidson Multi-cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Janus Balanced and Davidson Multi-cap.

Diversification Opportunities for Janus Balanced and Davidson Multi-cap

0.98

Correlation Coefficient

Janus Balanced  Davidson Multi-cap

Almost no diversification

The 3 months correlation between Janus and Davidson is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Janus Balanced Fund and Davidson Multi Cap Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Davidson Multi Cap and Janus Balanced 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 Janus Balanced Fund are associated (or correlated) with Davidson Multi-cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Davidson Multi Cap has no effect on the direction of Janus Balanced i.e., Janus Balanced and Davidson Multi-cap go up and down completely randomly.

Pair Corralation between Janus Balanced and Davidson Multi-cap

Assuming the 90 days horizon Janus Balanced Fund is expected to generate 0.78 times more return on investment than Davidson Multi-cap. However, Janus Balanced Fund is 1.29 times less risky than Davidson Multi-cap. It trades about -0.06 of its potential returns per unit of risk. Davidson Multi Cap Equity is currently generating about -0.08 per unit of risk. If you would invest  4,539  in Janus Balanced Fund on December 29, 2024 and sell it today you would lose (128.00) from holding Janus Balanced Fund or give up 2.82% of portfolio value over 90 days.

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

Janus Balanced Fund  vs.  Davidson Multi Cap Equity

Janus Balanced

Risk-Adjusted Performance

Very Weak

Over the last 90 days Janus Balanced Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Janus Balanced is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Davidson Multi Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Davidson Multi Cap Equity has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Davidson Multi-cap is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Janus Balanced and Davidson Multi-cap

The main advantage of trading using opposite Janus Balanced and Davidson Multi-cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Janus Balanced position performs unexpectedly, Davidson Multi-cap 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 Davidson Multi-cap will offset losses from the drop in Davidson Multi-cap's long position.

The idea behind Janus Balanced Fund and Davidson Multi Cap Equity 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.