Correlation Between First Trust and Davis Select
Can any of the company-specific risk be diversified away by investing in both First Trust 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 First Trust and Davis Select into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Dorsey and Davis Select International, you can compare the effects of market volatilities on First Trust 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 First Trust with a short position of Davis Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Davis Select.
Diversification Opportunities for First Trust and Davis Select
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between First and Davis is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Dorsey 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 First Trust 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 First Trust Dorsey 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 First Trust i.e., First Trust and Davis Select go up and down completely randomly.
Pair Corralation between First Trust and Davis Select
Given the investment horizon of 90 days First Trust Dorsey is expected to generate 1.1 times more return on investment than Davis Select. However, First Trust is 1.1 times more volatile than Davis Select International. It trades about 0.04 of its potential returns per unit of risk. Davis Select International is currently generating about 0.03 per unit of risk. If you would invest 2,445 in First Trust Dorsey on March 17, 2025 and sell it today you would earn a total of 90.00 from holding First Trust Dorsey or generate 3.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Dorsey vs. Davis Select International
Performance |
| Timeline |
| First Trust Dorsey |
| Davis Select Interna |
First Trust and Davis Select Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and Davis Select
The main advantage of trading using opposite First Trust and Davis Select positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust 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.| First Trust vs. First Trust Dorsey | First Trust vs. VanEck Morningstar Wide | First Trust vs. VictoryShares WestEnd Sector | First Trust vs. Arrow DWA Tactical |
| Davis Select vs. Davis Select Worldwide | Davis Select vs. Davis Select Financial | Davis Select vs. First Trust Dorsey |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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