Correlation Between Davis Financial and Cref Money

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

Diversification Opportunities for Davis Financial and Cref Money

0.95

Correlation Coefficient

Davis Financial  Cref Money

Almost no diversification

The 3 months correlation between Davis and Cref is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Davis Financial Fund and Cref Money Market in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cref Money Market 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 Cref Money. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cref Money Market has no effect on the direction of Davis Financial i.e., Davis Financial and Cref Money go up and down completely randomly.

Pair Corralation between Davis Financial and Cref Money

Assuming the 90 days horizon Davis Financial Fund is expected to generate 62.81 times more return on investment than Cref Money. However, Davis Financial is 62.81 times more volatile than Cref Money Market. It trades about 0.19 of its potential returns per unit of risk. Cref Money Market is currently generating about 1.01 per unit of risk. If you would invest  6,036  in Davis Financial Fund on September 13, 2024 and sell it today you would earn a total of  843.00  from holding Davis Financial Fund or generate 13.97% return on investment over 90 days.

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

Davis Financial Fund  vs.  Cref Money Market

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.

Cref Money Market

Risk-Adjusted Performance

79 of 100

Market Crasher

Compared to the overall equity markets, risk-adjusted returns on investments in Cref Money Market are ranked lower than 79 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong primary indicators, Cref Money 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 Cref Money

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

The idea behind Davis Financial Fund and Cref Money Market 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.