Correlation Between Artisan Small and Davis Financial

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

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

Diversification Opportunities for Artisan Small and Davis Financial

0.86

Correlation Coefficient

Artisan Small  Davis Financial

Very poor diversification

The 3 months correlation between Artisan and DAVIS is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Artisan Small Cap and Davis Financial Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Davis Financial and Artisan Small 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 Artisan Small Cap are associated (or correlated) with Davis Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Davis Financial has no effect on the direction of Artisan Small i.e., Artisan Small and Davis Financial go up and down completely randomly.

Pair Corralation between Artisan Small and Davis Financial

Assuming the 90 days horizon Artisan Small Cap is expected to generate 1.0 times more return on investment than Davis Financial. However, Artisan Small Cap is 1.0 times less risky than Davis Financial. It trades about 0.21 of its potential returns per unit of risk. Davis Financial Fund is currently generating about 0.18 per unit of risk. If you would invest  3,437  in Artisan Small Cap on August 31, 2024 and sell it today you would earn a total of  547.00  from holding Artisan Small Cap or generate 15.92% return on investment over 90 days.

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

Artisan Small Cap  vs.  Davis Financial Fund

Artisan Small Cap

Risk-Adjusted Performance

16 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Artisan Small Cap are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Artisan Small showed solid returns over the last few months and may actually be approaching a breakup point.

Davis Financial

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Davis Financial Fund are ranked lower than 14 (%) 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.

Pair Trading with Artisan Small and Davis Financial

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

The idea behind Artisan Small Cap and Davis Financial 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.