Correlation Between Moderately Aggressive and Davis Real

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

By analyzing existing cross correlation between Moderately Aggressive Balanced and Davis Real Estate, you can compare the effects of market volatilities on Moderately Aggressive and Davis Real 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 Moderately Aggressive with a short position of Davis Real. Check out your portfolio center. Please also check ongoing floating volatility patterns of Moderately Aggressive and Davis Real.

Diversification Opportunities for Moderately Aggressive and Davis Real

0.02

Correlation Coefficient

Moderately Aggressive  Davis Real

Significant diversification

The 3 months correlation between Moderately and Davis is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Moderately Aggressive Balanced and Davis Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Davis Real Estate and Moderately Aggressive 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 Moderately Aggressive Balanced are associated (or correlated) with Davis Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Davis Real Estate has no effect on the direction of Moderately Aggressive i.e., Moderately Aggressive and Davis Real go up and down completely randomly.

Pair Corralation between Moderately Aggressive and Davis Real

Assuming the 90 days horizon Moderately Aggressive Balanced is expected to generate 0.46 times more return on investment than Davis Real. However, Moderately Aggressive Balanced is 2.19 times less risky than Davis Real. It trades about 0.18 of its potential returns per unit of risk. Davis Real Estate is currently generating about 0.06 per unit of risk. If you would invest  1,213  in Moderately Aggressive Balanced on May 26, 2025 and sell it today you would earn a total of  56.00  from holding Moderately Aggressive Balanced or generate 4.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Moderately Aggressive Balanced  vs.  Davis Real Estate

Moderately Aggressive

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Moderately Aggressive Balanced are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Moderately Aggressive is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Davis Real Estate

Risk-Adjusted Performance

Soft

Compared to the overall equity markets, risk-adjusted returns on investments in Davis Real Estate are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Davis Real is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Moderately Aggressive and Davis Real

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

The idea behind Moderately Aggressive Balanced and Davis Real Estate 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.