Correlation Between Growth Opportunities and Davis New

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

By analyzing existing cross correlation between Growth Opportunities Fund and Davis New York, you can compare the effects of market volatilities on Growth Opportunities and Davis New 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 Growth Opportunities with a short position of Davis New. Check out your portfolio center. Please also check ongoing floating volatility patterns of Growth Opportunities and Davis New.

Diversification Opportunities for Growth Opportunities and Davis New

0.96

Correlation Coefficient

Growth Opportunities  Davis New

Almost no diversification

The 3 months correlation between GROWTH and Davis is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Growth Opportunities Fund and Davis New York in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Davis New York and Growth Opportunities 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 Growth Opportunities Fund are associated (or correlated) with Davis New. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Davis New York has no effect on the direction of Growth Opportunities i.e., Growth Opportunities and Davis New go up and down completely randomly.

Pair Corralation between Growth Opportunities and Davis New

Assuming the 90 days horizon Growth Opportunities Fund is expected to generate 1.01 times more return on investment than Davis New. However, Growth Opportunities is 1.01 times more volatile than Davis New York. It trades about 0.2 of its potential returns per unit of risk. Davis New York is currently generating about 0.14 per unit of risk. If you would invest  5,187  in Growth Opportunities Fund on September 2, 2024 and sell it today you would earn a total of  669.00  from holding Growth Opportunities Fund or generate 12.9% return on investment over 90 days.

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

Growth Opportunities Fund  vs.  Davis New York

Growth Opportunities

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Growth Opportunities Fund are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Growth Opportunities may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Davis New York

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Davis New York are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Davis New may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Growth Opportunities and Davis New

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

The idea behind Growth Opportunities Fund and Davis New York 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.