Correlation Between American Funds and Davis Global

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

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

Diversification Opportunities for American Funds and Davis Global

-0.43

Correlation Coefficient

American Funds  Davis Global

Very good diversification

The 3 months correlation between American and Davis is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Inflation and Davis Global Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Davis Global and American Funds 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 American Funds Inflation are associated (or correlated) with Davis Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Davis Global has no effect on the direction of American Funds i.e., American Funds and Davis Global go up and down completely randomly.

Pair Corralation between American Funds and Davis Global

Assuming the 90 days horizon American Funds Inflation is expected to under-perform the Davis Global. But the mutual fund apears to be less risky and, when comparing its historical volatility, American Funds Inflation is 4.87 times less risky than Davis Global. The mutual fund trades about -0.06 of its potential returns per unit of risk. The Davis Global Fund is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  2,843  in Davis Global Fund on September 13, 2024 and sell it today you would earn a total of  418.00  from holding Davis Global Fund or generate 14.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

American Funds Inflation  vs.  Davis Global Fund

American Funds Inflation

Risk-Adjusted Performance

0 of 100

Very Weak

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

Davis Global

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Davis Global Fund are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Davis Global showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with American Funds and Davis Global

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

The idea behind American Funds Inflation and Davis Global 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.