Correlation Between Davis Financial and Goldman Sachs

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

Diversification Opportunities for Davis Financial and Goldman Sachs

-0.87

Correlation Coefficient

Davis Financial  Goldman Sachs

Pay attention - limited upside

The 3 months correlation between DAVIS and Goldman is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding Davis Financial Fund and Goldman Sachs Clean in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs Clean 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 Goldman Sachs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Goldman Sachs Clean has no effect on the direction of Davis Financial i.e., Davis Financial and Goldman Sachs go up and down completely randomly.

Pair Corralation between Davis Financial and Goldman Sachs

Assuming the 90 days horizon Davis Financial Fund is expected to generate 0.96 times more return on investment than Goldman Sachs. However, Davis Financial Fund is 1.04 times less risky than Goldman Sachs. It trades about 0.31 of its potential returns per unit of risk. Goldman Sachs Clean is currently generating about -0.12 per unit of risk. If you would invest  6,436  in Davis Financial Fund on September 1, 2024 and sell it today you would earn a total of  643.00  from holding Davis Financial Fund or generate 9.99% return on investment over 90 days.

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

Davis Financial Fund  vs.  Goldman Sachs Clean

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

Goldman Sachs Clean

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Goldman Sachs Clean has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest unfluctuating performance, the Fund's fundamental drivers 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 Goldman Sachs

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

The idea behind Davis Financial Fund and Goldman Sachs Clean 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.