Correlation Between Davis Financial and Thrivent Small

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

Diversification Opportunities for Davis Financial and Thrivent Small

0.76

Correlation Coefficient

Davis Financial  Thrivent Small

Poor diversification

The 3 months correlation between Davis and Thrivent is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Davis Financial Fund and Thrivent Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thrivent Small 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 Thrivent Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thrivent Small Cap has no effect on the direction of Davis Financial i.e., Davis Financial and Thrivent Small go up and down completely randomly.

Pair Corralation between Davis Financial and Thrivent Small

Assuming the 90 days horizon Davis Financial Fund is expected to generate 1.01 times more return on investment than Thrivent Small. However, Davis Financial is 1.01 times more volatile than Thrivent Small Cap. It trades about 0.2 of its potential returns per unit of risk. Thrivent Small Cap is currently generating about 0.16 per unit of risk. If you would invest  5,987  in Davis Financial Fund on September 12, 2024 and sell it today you would earn a total of  894.00  from holding Davis Financial Fund or generate 14.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Davis Financial Fund  vs.  Thrivent Small Cap

Davis Financial

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Davis Financial Fund are ranked lower than 15 (%) 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.

Thrivent Small Cap

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Thrivent Small Cap 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, Thrivent Small may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Davis Financial and Thrivent Small

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

The idea behind Davis Financial Fund and Thrivent Small 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.