Correlation Between Davis Government and Strategic Asset

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

By analyzing existing cross correlation between Davis Government Bond and Strategic Asset Management, you can compare the effects of market volatilities on Davis Government and Strategic Asset 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 Government with a short position of Strategic Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Davis Government and Strategic Asset.

Diversification Opportunities for Davis Government and Strategic Asset

0.85

Correlation Coefficient

Davis Government  Strategic Asset

Very poor diversification

The 3 months correlation between Davis and Strategic is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Davis Government Bond and Strategic Asset Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Strategic Asset Mana and Davis Government 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 Government Bond are associated (or correlated) with Strategic Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Strategic Asset Mana has no effect on the direction of Davis Government i.e., Davis Government and Strategic Asset go up and down completely randomly.

Pair Corralation between Davis Government and Strategic Asset

Assuming the 90 days horizon Davis Government is expected to generate 2.82 times less return on investment than Strategic Asset. But when comparing it to its historical volatility, Davis Government Bond is 1.6 times less risky than Strategic Asset. It trades about 0.18 of its potential returns per unit of risk. Strategic Asset Management is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest  1,200  in Strategic Asset Management on May 21, 2025 and sell it today you would earn a total of  55.00  from holding Strategic Asset Management or generate 4.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.39%
Values	Daily Returns

Davis Government Bond  vs.  Strategic Asset Management

Davis Government Bond

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Davis Government Bond are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Davis Government is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Strategic Asset Mana

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Strategic Asset Management are ranked lower than 25 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Strategic Asset is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Davis Government and Strategic Asset

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

The idea behind Davis Government Bond and Strategic Asset Management 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.