Correlation Between Davis Financial and Altegris Futures

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

Diversification Opportunities for Davis Financial and Altegris Futures

-0.59

Correlation Coefficient

Davis Financial  Altegris Futures

Excellent diversification

The 3 months correlation between Davis and Altegris is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Davis Financial Fund and Altegris Futures Evolution in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Altegris Futures Evo 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 Altegris Futures. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Altegris Futures Evo has no effect on the direction of Davis Financial i.e., Davis Financial and Altegris Futures go up and down completely randomly.

Pair Corralation between Davis Financial and Altegris Futures

Assuming the 90 days horizon Davis Financial Fund is expected to under-perform the Altegris Futures. In addition to that, Davis Financial is 1.73 times more volatile than Altegris Futures Evolution. It trades about -0.28 of its total potential returns per unit of risk. Altegris Futures Evolution is currently generating about -0.08 per unit of volatility. If you would invest  674.00  in Altegris Futures Evolution on September 20, 2024 and sell it today you would lose (9.00) from holding Altegris Futures Evolution or give up 1.34% of portfolio value over 90 days.

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

Davis Financial Fund  vs.  Altegris Futures Evolution

Davis Financial

Risk-Adjusted Performance

0 of 100

Very Weak

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

Altegris Futures Evo

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Altegris Futures Evolution has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Davis Financial and Altegris Futures

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

The idea behind Davis Financial Fund and Altegris Futures Evolution 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.