Correlation Between Davis Financial and Saat Aggressive

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

Diversification Opportunities for Davis Financial and Saat Aggressive

0.9

Correlation Coefficient

Davis Financial  Saat Aggressive

Almost no diversification

The 3 months correlation between Davis and Saat is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Davis Financial Fund and Saat Aggressive Strategy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Saat Aggressive Strategy 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 Saat Aggressive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Saat Aggressive Strategy has no effect on the direction of Davis Financial i.e., Davis Financial and Saat Aggressive go up and down completely randomly.

Pair Corralation between Davis Financial and Saat Aggressive

Assuming the 90 days horizon Davis Financial Fund is expected to under-perform the Saat Aggressive. In addition to that, Davis Financial is 1.74 times more volatile than Saat Aggressive Strategy. It trades about -0.03 of its total potential returns per unit of risk. Saat Aggressive Strategy is currently generating about -0.05 per unit of volatility. If you would invest  1,471  in Saat Aggressive Strategy on December 5, 2024 and sell it today you would lose (28.00) from holding Saat Aggressive Strategy or give up 1.9% of portfolio value over 90 days.

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

Davis Financial Fund  vs.  Saat Aggressive Strategy

Davis Financial

Risk-Adjusted Performance

Very Weak

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

Saat Aggressive Strategy

Risk-Adjusted Performance

Very Weak

Over the last 90 days Saat Aggressive Strategy has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Saat Aggressive 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 Saat Aggressive

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

The idea behind Davis Financial Fund and Saat Aggressive Strategy 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.