Correlation Between Davis Financial and Icon Financial

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

Diversification Opportunities for Davis Financial and Icon Financial

0.93

Correlation Coefficient

Davis Financial  Icon Financial

Almost no diversification

The 3 months correlation between Davis and Icon is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Davis Financial Fund and Icon Financial Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Icon Financial 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 Icon Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Icon Financial has no effect on the direction of Davis Financial i.e., Davis Financial and Icon Financial go up and down completely randomly.

Pair Corralation between Davis Financial and Icon Financial

Assuming the 90 days horizon Davis Financial Fund is expected to generate 1.17 times more return on investment than Icon Financial. However, Davis Financial is 1.17 times more volatile than Icon Financial Fund. It trades about 0.18 of its potential returns per unit of risk. Icon Financial Fund is currently generating about 0.14 per unit of risk. If you would invest  6,476  in Davis Financial Fund on August 31, 2024 and sell it today you would earn a total of  898.00  from holding Davis Financial Fund or generate 13.87% return on investment over 90 days.

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

Davis Financial Fund  vs.  Icon Financial Fund

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 basic indicators, Davis Financial showed solid returns over the last few months and may actually be approaching a breakup point.

Icon Financial

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Icon Financial Fund are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Icon Financial may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Davis Financial and Icon Financial

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

The idea behind Davis Financial Fund and Icon 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 Stocks Directory module to find actively traded stocks across global markets.