Correlation Between Davis New and Thornburg International

Can any of the company-specific risk be diversified away by investing in both Davis New and Thornburg International 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 New and Thornburg International into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Davis New York and Thornburg International Value, you can compare the effects of market volatilities on Davis New and Thornburg International 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 New with a short position of Thornburg International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Davis New and Thornburg International.

Diversification Opportunities for Davis New and Thornburg International

-0.53

Correlation Coefficient

Davis New  Thornburg International

Excellent diversification

The 3 months correlation between Davis and Thornburg is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Davis New York and Thornburg International Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thornburg International and Davis New 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 New York are associated (or correlated) with Thornburg International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thornburg International has no effect on the direction of Davis New i.e., Davis New and Thornburg International go up and down completely randomly.

Pair Corralation between Davis New and Thornburg International

Assuming the 90 days horizon Davis New York is expected to generate 1.78 times more return on investment than Thornburg International. However, Davis New is 1.78 times more volatile than Thornburg International Value. It trades about -0.03 of its potential returns per unit of risk. Thornburg International Value is currently generating about -0.1 per unit of risk. If you would invest  2,796  in Davis New York on September 16, 2024 and sell it today you would lose (126.00) from holding Davis New York or give up 4.51% of portfolio value over 90 days.

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

Davis New York  vs.  Thornburg International Value

Davis New York

Risk-Adjusted Performance

0 of 100

Very Weak

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

Thornburg International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Thornburg International Value has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Thornburg International 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 New and Thornburg International

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

The idea behind Davis New York and Thornburg International Value 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.