Correlation Between Davis Financial and Guidepath Income

Can any of the company-specific risk be diversified away by investing in both Davis Financial and Guidepath Income 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 Guidepath Income 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 Guidepath Income, you can compare the effects of market volatilities on Davis Financial and Guidepath Income 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 Guidepath Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Davis Financial and Guidepath Income.

Diversification Opportunities for Davis Financial and Guidepath Income

0.67

Correlation Coefficient

Davis Financial  Guidepath Income

Poor diversification

The 3 months correlation between Davis and Guidepath is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Davis Financial Fund and Guidepath Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guidepath Income 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 Guidepath Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guidepath Income has no effect on the direction of Davis Financial i.e., Davis Financial and Guidepath Income go up and down completely randomly.

Pair Corralation between Davis Financial and Guidepath Income

Assuming the 90 days horizon Davis Financial Fund is expected to generate 3.43 times more return on investment than Guidepath Income. However, Davis Financial is 3.43 times more volatile than Guidepath Income. It trades about 0.25 of its potential returns per unit of risk. Guidepath Income is currently generating about 0.01 per unit of risk. If you would invest  6,508  in Davis Financial Fund on April 30, 2025 and sell it today you would earn a total of  932.00  from holding Davis Financial Fund or generate 14.32% 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.  Guidepath Income

Davis Financial

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Davis Financial Fund are ranked lower than 19 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Davis Financial showed solid returns over the last few months and may actually be approaching a breakup point.

Guidepath Income

Risk-Adjusted Performance

Very Weak

Over the last 90 days Guidepath Income has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Guidepath Income 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 Financial and Guidepath Income

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

The idea behind Davis Financial Fund and Guidepath Income 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.