Correlation Between Davis Financial and Victory Sp

Can any of the company-specific risk be diversified away by investing in both Davis Financial and Victory Sp 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 Victory Sp 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 Victory Sp 500, you can compare the effects of market volatilities on Davis Financial and Victory Sp 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 Victory Sp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Davis Financial and Victory Sp.

Diversification Opportunities for Davis Financial and Victory Sp

0.82

Correlation Coefficient

Davis Financial  Victory Sp

Very poor diversification

The 3 months correlation between Davis and Victory is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Davis Financial Fund and Victory Sp 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Victory Sp 500 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 Victory Sp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Victory Sp 500 has no effect on the direction of Davis Financial i.e., Davis Financial and Victory Sp go up and down completely randomly.

Pair Corralation between Davis Financial and Victory Sp

Assuming the 90 days horizon Davis Financial Fund is expected to generate 0.39 times more return on investment than Victory Sp. However, Davis Financial Fund is 2.53 times less risky than Victory Sp. It trades about -0.18 of its potential returns per unit of risk. Victory Sp 500 is currently generating about -0.17 per unit of risk. If you would invest  6,850  in Davis Financial Fund on September 18, 2024 and sell it today you would lose (291.00) from holding Davis Financial Fund or give up 4.25% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.24%
Values	Daily Returns

Davis Financial Fund  vs.  Victory Sp 500

Davis Financial

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Davis Financial Fund are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Davis Financial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Victory Sp 500

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Victory Sp 500 has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Victory Sp is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Davis Financial and Victory Sp

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

The idea behind Davis Financial Fund and Victory Sp 500 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.