Correlation Between Davis Financial and Prudential Emerging
Can any of the company-specific risk be diversified away by investing in both Davis Financial and Prudential Emerging 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 Davis Financial and Prudential Emerging into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Davis Financial Fund and Prudential Emerging Markets, you can compare the effects of market volatilities on Davis Financial and Prudential Emerging 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 Davis Financial with a short position of Prudential Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Davis Financial and Prudential Emerging.
Diversification Opportunities for Davis Financial and Prudential Emerging
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Davis and Prudential is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Davis Financial Fund and Prudential Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Emerging and Davis Financial 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 Davis Financial Fund are associated (or correlated) with Prudential Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential Emerging has no effect on the direction of Davis Financial i.e., Davis Financial and Prudential Emerging go up and down completely randomly.
Pair Corralation between Davis Financial and Prudential Emerging
Assuming the 90 days horizon Davis Financial Fund is expected to generate 3.1 times more return on investment than Prudential Emerging. However, Davis Financial is 3.1 times more volatile than Prudential Emerging Markets. It trades about 0.08 of its potential returns per unit of risk. Prudential Emerging Markets is currently generating about 0.08 per unit of risk. If you would invest 6,263 in Davis Financial Fund on May 27, 2025 and sell it today you would earn a total of 1,674 from holding Davis Financial Fund or generate 26.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Davis Financial Fund vs. Prudential Emerging Markets
Performance |
| Timeline |
| Davis Financial |
| Prudential Emerging |
Davis Financial and Prudential Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Davis Financial and Prudential Emerging
The main advantage of trading using opposite Davis Financial and Prudential Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Davis Financial position performs unexpectedly, Prudential Emerging 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 Prudential Emerging will offset losses from the drop in Prudential Emerging's long position.| Davis Financial vs. Davis International Fund | Davis Financial vs. Davis International Fund | Davis Financial vs. Davis International Fund | Davis Financial vs. Davis Financial Fund |
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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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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