Correlation Between Davis Financial and Americafirst Large

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

Diversification Opportunities for Davis Financial and Americafirst Large

0.89

Correlation Coefficient

Davis Financial  Americafirst Large

Very poor diversification

The 3 months correlation between Davis and Americafirst is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Davis Financial Fund and Americafirst Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Americafirst Large Cap 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 Americafirst Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Americafirst Large Cap has no effect on the direction of Davis Financial i.e., Davis Financial and Americafirst Large go up and down completely randomly.

Pair Corralation between Davis Financial and Americafirst Large

Assuming the 90 days horizon Davis Financial Fund is expected to generate 1.37 times more return on investment than Americafirst Large. However, Davis Financial is 1.37 times more volatile than Americafirst Large Cap. It trades about 0.04 of its potential returns per unit of risk. Americafirst Large Cap is currently generating about 0.04 per unit of risk. If you would invest  6,233  in Davis Financial Fund on September 22, 2024 and sell it today you would earn a total of  154.00  from holding Davis Financial Fund or generate 2.47% return on investment over 90 days.

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

Davis Financial Fund  vs.  Americafirst Large Cap

Davis Financial

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Davis Financial Fund are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. 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.

Americafirst Large Cap

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Americafirst Large Cap are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Americafirst Large 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 Americafirst Large

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

The idea behind Davis Financial Fund and Americafirst Large Cap 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.