Correlation Between Davis Real and Global Gold

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

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

Diversification Opportunities for Davis Real and Global Gold

0.16

Correlation Coefficient

Davis Real  Global Gold

Average diversification

The 3 months correlation between Davis and Global is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Davis Real Estate and Global Gold Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Gold Fund and Davis Real 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 Real Estate are associated (or correlated) with Global Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Gold Fund has no effect on the direction of Davis Real i.e., Davis Real and Global Gold go up and down completely randomly.

Pair Corralation between Davis Real and Global Gold

Assuming the 90 days horizon Davis Real Estate is expected to generate 0.45 times more return on investment than Global Gold. However, Davis Real Estate is 2.25 times less risky than Global Gold. It trades about 0.12 of its potential returns per unit of risk. Global Gold Fund is currently generating about -0.14 per unit of risk. If you would invest  4,465  in Davis Real Estate on September 4, 2024 and sell it today you would earn a total of  100.00  from holding Davis Real Estate or generate 2.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Davis Real Estate  vs.  Global Gold Fund

Davis Real Estate

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Davis Real Estate are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Davis Real is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Global Gold Fund

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Global Gold Fund are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Global Gold may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Davis Real and Global Gold

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

The idea behind Davis Real Estate and Global Gold 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.