Correlation Between Davis International and Barings Emerging

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

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

Diversification Opportunities for Davis International and Barings Emerging

0.39

Correlation Coefficient

Davis International  Barings Emerging

Weak diversification

The 3 months correlation between Davis and Barings is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Davis International Fund and Barings Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barings Emerging Markets and Davis International 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 International Fund are associated (or correlated) with Barings Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Barings Emerging Markets has no effect on the direction of Davis International i.e., Davis International and Barings Emerging go up and down completely randomly.

Pair Corralation between Davis International and Barings Emerging

Assuming the 90 days horizon Davis International Fund is expected to generate 6.21 times more return on investment than Barings Emerging. However, Davis International is 6.21 times more volatile than Barings Emerging Markets. It trades about 0.0 of its potential returns per unit of risk. Barings Emerging Markets is currently generating about -0.18 per unit of risk. If you would invest  1,324  in Davis International Fund on September 24, 2024 and sell it today you would lose (14.00) from holding Davis International Fund or give up 1.06% of portfolio value over 90 days.

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

Davis International Fund  vs.  Barings Emerging Markets

Davis International

Risk-Adjusted Performance

0 of 100

Very Weak

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

Barings Emerging Markets

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Barings Emerging Markets has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Barings Emerging 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 International and Barings Emerging

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

The idea behind Davis International Fund and Barings Emerging Markets 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.

Check out your portfolio center.

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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..