Correlation Between Qs Large and Davis Global

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

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

Diversification Opportunities for Qs Large and Davis Global

0.71

Correlation Coefficient

Qs Large  Davis Global

Poor diversification

The 3 months correlation between LMTIX and Davis is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Qs Large Cap and Davis Global Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Davis Global and Qs Large 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 Qs Large Cap 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 Qs Large i.e., Qs Large and Davis Global go up and down completely randomly.

Pair Corralation between Qs Large and Davis Global

Assuming the 90 days horizon Qs Large is expected to generate 1.09 times less return on investment than Davis Global. But when comparing it to its historical volatility, Qs Large Cap is 1.23 times less risky than Davis Global. It trades about 0.12 of its potential returns per unit of risk. Davis Global Fund is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  2,794  in Davis Global Fund on September 12, 2024 and sell it today you would earn a total of  440.00  from holding Davis Global Fund or generate 15.75% return on investment over 90 days.

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

Qs Large Cap  vs.  Davis Global Fund

Qs Large Cap

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Qs Large Cap are ranked lower than 20 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Qs Large may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Davis Global

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Davis Global 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 Global showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Qs Large and Davis Global

The main advantage of trading using opposite Qs Large and Davis Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Qs Large 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 Qs Large Cap 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.