Correlation Between Nasdaq-100 Fund and Davis International

Can any of the company-specific risk be diversified away by investing in both Nasdaq-100 Fund and Davis 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 Nasdaq-100 Fund and Davis International into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Nasdaq 100 Fund Class and Davis International Fund, you can compare the effects of market volatilities on Nasdaq-100 Fund and Davis 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 Nasdaq-100 Fund with a short position of Davis International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq-100 Fund and Davis International.

Diversification Opportunities for Nasdaq-100 Fund and Davis International

-0.42

Correlation Coefficient

Nasdaq-100 Fund  Davis International

Very good diversification

The 3 months correlation between Nasdaq-100 and Davis is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq 100 Fund Class and Davis International Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Davis International and Nasdaq-100 Fund 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 Nasdaq 100 Fund Class are associated (or correlated) with Davis International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Davis International has no effect on the direction of Nasdaq-100 Fund i.e., Nasdaq-100 Fund and Davis International go up and down completely randomly.

Pair Corralation between Nasdaq-100 Fund and Davis International

Assuming the 90 days horizon Nasdaq 100 Fund Class is expected to under-perform the Davis International. But the mutual fund apears to be less risky and, when comparing its historical volatility, Nasdaq 100 Fund Class is 1.03 times less risky than Davis International. The mutual fund trades about -0.08 of its potential returns per unit of risk. The Davis International Fund is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,275  in Davis International Fund on December 29, 2024 and sell it today you would earn a total of  83.00  from holding Davis International Fund or generate 6.51% return on investment over 90 days.

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

Nasdaq 100 Fund Class  vs.  Davis International Fund

Nasdaq 100 Fund

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nasdaq 100 Fund Class has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Davis International

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Davis International Fund are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Davis International may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Nasdaq-100 Fund and Davis International

The main advantage of trading using opposite Nasdaq-100 Fund and Davis International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq-100 Fund position performs unexpectedly, Davis 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 Davis International will offset losses from the drop in Davis International's long position.

The idea behind Nasdaq 100 Fund Class and Davis International 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..