Correlation Between Listed Funds and Davis Select

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

By analyzing existing cross correlation between Listed Funds Trust and Davis Select International, you can compare the effects of market volatilities on Listed Funds and Davis Select 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 Listed Funds with a short position of Davis Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of Listed Funds and Davis Select.

Diversification Opportunities for Listed Funds and Davis Select

0.94

Correlation Coefficient

Listed Funds  Davis Select

Almost no diversification

The 3 months correlation between Listed and Davis is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Listed Funds Trust and Davis Select International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Davis Select Interna and Listed Funds 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 Listed Funds Trust are associated (or correlated) with Davis Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Davis Select Interna has no effect on the direction of Listed Funds i.e., Listed Funds and Davis Select go up and down completely randomly.

Pair Corralation between Listed Funds and Davis Select

Given the investment horizon of 90 days Listed Funds is expected to generate 6.14 times less return on investment than Davis Select. But when comparing it to its historical volatility, Listed Funds Trust is 1.47 times less risky than Davis Select. It trades about 0.03 of its potential returns per unit of risk. Davis Select International is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1,907  in Davis Select International on January 26, 2024 and sell it today you would earn a total of  45.00  from holding Davis Select International or generate 2.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	95.45%
Values	Daily Returns

Listed Funds Trust  vs.  Davis Select International

Listed Funds Trust

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Listed Funds Trust are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Listed Funds is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Davis Select Interna

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Davis Select International are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Davis Select may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Listed Funds and Davis Select

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

The idea behind Listed Funds Trust and Davis Select International 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.