Correlation Between Dodge Cox and Dodge Income

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

By analyzing existing cross correlation between Dodge Cox Emerging and Dodge Income Fund, you can compare the effects of market volatilities on Dodge Cox and Dodge 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 Dodge Cox with a short position of Dodge Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dodge Cox and Dodge Income.

Diversification Opportunities for Dodge Cox and Dodge Income

0.11

Correlation Coefficient

Dodge Cox  Dodge Income

Average diversification

The 3 months correlation between Dodge and Dodge is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Dodge Cox Emerging and Dodge Income Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dodge Income and Dodge Cox 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 Dodge Cox Emerging are associated (or correlated) with Dodge Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dodge Income has no effect on the direction of Dodge Cox i.e., Dodge Cox and Dodge Income go up and down completely randomly.

Pair Corralation between Dodge Cox and Dodge Income

Assuming the 90 days horizon Dodge Cox Emerging is expected to generate 2.81 times more return on investment than Dodge Income. However, Dodge Cox is 2.81 times more volatile than Dodge Income Fund. It trades about 0.04 of its potential returns per unit of risk. Dodge Income Fund is currently generating about -0.15 per unit of risk. If you would invest  896.00  in Dodge Cox Emerging on September 17, 2024 and sell it today you would earn a total of  18.00  from holding Dodge Cox Emerging or generate 2.01% return on investment over 90 days.

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

Dodge Cox Emerging  vs.  Dodge Income Fund

Dodge Cox Emerging

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Dodge Cox Emerging are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Dodge Cox is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Dodge Income

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Dodge Cox Emerging and Dodge Income Fund 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.