Correlation Between Davis Financial and Allianzgi Technology

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

Diversification Opportunities for Davis Financial and Allianzgi Technology

0.89

Correlation Coefficient

Davis Financial  Allianzgi Technology

Very poor diversification

The 3 months correlation between Davis and Allianzgi is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Davis Financial Fund and Allianzgi Technology Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allianzgi Technology 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 Allianzgi Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allianzgi Technology has no effect on the direction of Davis Financial i.e., Davis Financial and Allianzgi Technology go up and down completely randomly.

Pair Corralation between Davis Financial and Allianzgi Technology

Assuming the 90 days horizon Davis Financial is expected to generate 1.29 times less return on investment than Allianzgi Technology. But when comparing it to its historical volatility, Davis Financial Fund is 1.5 times less risky than Allianzgi Technology. It trades about 0.2 of its potential returns per unit of risk. Allianzgi Technology Fund is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  8,965  in Allianzgi Technology Fund on September 8, 2024 and sell it today you would earn a total of  337.00  from holding Allianzgi Technology Fund or generate 3.76% return on investment over 90 days.

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

Davis Financial Fund  vs.  Allianzgi Technology Fund

Davis Financial

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Davis Financial Fund are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Davis Financial showed solid returns over the last few months and may actually be approaching a breakup point.

Allianzgi Technology

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Allianzgi Technology Fund are ranked lower than 20 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Allianzgi Technology showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Davis Financial and Allianzgi Technology

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

The idea behind Davis Financial Fund and Allianzgi Technology Fund 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.