Correlation Between Davis Financial and Shenkman Floating

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

Diversification Opportunities for Davis Financial and Shenkman Floating

0.95

Correlation Coefficient

Davis Financial  Shenkman Floating

Almost no diversification

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

Pair Corralation between Davis Financial and Shenkman Floating

Assuming the 90 days horizon Davis Financial Fund is expected to generate 11.73 times more return on investment than Shenkman Floating. However, Davis Financial is 11.73 times more volatile than Shenkman Floating Rate. It trades about 0.16 of its potential returns per unit of risk. Shenkman Floating Rate is currently generating about 0.24 per unit of risk. If you would invest  6,113  in Davis Financial Fund on September 14, 2024 and sell it today you would earn a total of  721.00  from holding Davis Financial Fund or generate 11.79% 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.  Shenkman Floating Rate

Davis Financial

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Davis Financial Fund are ranked lower than 12 (%) 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.

Shenkman Floating Rate

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Shenkman Floating Rate are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Shenkman Floating 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 Shenkman Floating

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

The idea behind Davis Financial Fund and Shenkman Floating Rate 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.