Correlation Between Growth Fund and Davenport Core

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

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

Diversification Opportunities for Growth Fund and Davenport Core

0.83

Correlation Coefficient

Growth Fund  Davenport Core

Very poor diversification

The 3 months correlation between Growth and Davenport is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Growth Fund Of and Davenport E Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Davenport E Fund and Growth Fund 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 Fund Of are associated (or correlated) with Davenport Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Davenport E Fund has no effect on the direction of Growth Fund i.e., Growth Fund and Davenport Core go up and down completely randomly.

Pair Corralation between Growth Fund and Davenport Core

Assuming the 90 days horizon Growth Fund Of is expected to generate 1.21 times more return on investment than Davenport Core. However, Growth Fund is 1.21 times more volatile than Davenport E Fund. It trades about 0.22 of its potential returns per unit of risk. Davenport E Fund is currently generating about 0.25 per unit of risk. If you would invest  6,018  in Growth Fund Of on February 27, 2024 and sell it today you would earn a total of  216.00  from holding Growth Fund Of or generate 3.59% return on investment over 90 days.

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

Growth Fund Of  vs.  Davenport E Fund

Growth Fund

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Growth Fund Of are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Growth Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Davenport E Fund

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Davenport E Fund are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Davenport Core is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Growth Fund and Davenport Core

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

The idea behind Growth Fund Of and Davenport E Fund 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.