Correlation Between Total Return and Davis New

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

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

Diversification Opportunities for Total Return and Davis New

-0.51

Correlation Coefficient

Total Return  Davis New

Excellent diversification

The 3 months correlation between Total and Davis is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Total Return Fund and Davis New York in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Davis New York and Total Return 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 Total Return Fund are associated (or correlated) with Davis New. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Davis New York has no effect on the direction of Total Return i.e., Total Return and Davis New go up and down completely randomly.

Pair Corralation between Total Return and Davis New

Assuming the 90 days horizon Total Return Fund is expected to generate 0.3 times more return on investment than Davis New. However, Total Return Fund is 3.39 times less risky than Davis New. It trades about 0.07 of its potential returns per unit of risk. Davis New York is currently generating about 0.01 per unit of risk. If you would invest  798.00  in Total Return Fund on September 15, 2024 and sell it today you would earn a total of  58.00  from holding Total Return Fund or generate 7.27% return on investment over 90 days.

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

Total Return Fund  vs.  Davis New York

Total Return

Risk-Adjusted Performance

0 of 100

Very Weak

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

Davis New York

Risk-Adjusted Performance

0 of 100

OK

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.

Pair Trading with Total Return and Davis New

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

The idea behind Total Return Fund and Davis New York 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.