Correlation Between SPDR SP and Davis Select

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Can any of the company-specific risk be diversified away by investing in both SPDR SP 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 SPDR SP and Davis Select into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPDR SP 400 and Davis Select International, you can compare the effects of market volatilities on SPDR SP 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 SPDR SP with a short position of Davis Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and Davis Select.

Diversification Opportunities for SPDR SP and Davis Select

-0.39
  Correlation Coefficient

Very good diversification

The 3 months correlation between SPDR and Davis is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP 400 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 SPDR SP 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 SPDR SP 400 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 SPDR SP i.e., SPDR SP and Davis Select go up and down completely randomly.

Pair Corralation between SPDR SP and Davis Select

Given the investment horizon of 90 days SPDR SP 400 is expected to generate 0.95 times more return on investment than Davis Select. However, SPDR SP 400 is 1.05 times less risky than Davis Select. It trades about 0.18 of its potential returns per unit of risk. Davis Select International is currently generating about 0.14 per unit of risk. If you would invest  7,607  in SPDR SP 400 on November 24, 2023 and sell it today you would earn a total of  303.00  from holding SPDR SP 400 or generate 3.98% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

SPDR SP 400  vs.  Davis Select International

 Performance 
       Timeline  
SPDR SP 400 

Risk-Adjusted Performance

15 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SP 400 are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, SPDR SP may actually be approaching a critical reversion point that can send shares even higher in March 2024.
Davis Select Interna 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Davis Select International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Davis Select is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

SPDR SP and Davis Select Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with SPDR SP and Davis Select

The main advantage of trading using opposite SPDR SP and Davis Select positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR SP 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 SPDR SP 400 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.
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..

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