Correlation Between Davis Real and General Money

Can any of the company-specific risk be diversified away by investing in both Davis Real and General 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 Real and General Money into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Davis Real Estate and General Money Market, you can compare the effects of market volatilities on Davis Real and General 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 Real with a short position of General Money. Check out your portfolio center. Please also check ongoing floating volatility patterns of Davis Real and General Money.

Diversification Opportunities for Davis Real and General Money

-0.43

Correlation Coefficient

Davis Real  General Money

Very good diversification

The 3 months correlation between Davis and General is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Davis Real Estate and General Money Market in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Money Market and Davis Real 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 Real Estate are associated (or correlated) with General Money. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of General Money Market has no effect on the direction of Davis Real i.e., Davis Real and General Money go up and down completely randomly.

Pair Corralation between Davis Real and General Money

Assuming the 90 days horizon Davis Real is expected to generate 1.03 times less return on investment than General Money. In addition to that, Davis Real is 6.89 times more volatile than General Money Market. It trades about 0.02 of its total potential returns per unit of risk. General Money Market is currently generating about 0.13 per unit of volatility. If you would invest  99.00  in General Money Market on September 4, 2024 and sell it today you would earn a total of  1.00  from holding General Money Market or generate 1.01% return on investment over 90 days.

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

Davis Real Estate  vs.  General Money Market

Davis Real Estate

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Davis Real Estate are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Davis Real is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

General Money Market

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in General Money Market are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, General 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 Real and General Money

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

The idea behind Davis Real Estate and General 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.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.