Correlation Between Dodge International and Vanguard International

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

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

Diversification Opportunities for Dodge International and Vanguard International

0.89

Correlation Coefficient

Dodge International  Vanguard International

Very poor diversification

The 3 months correlation between Dodge and Vanguard is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Dodge International Stock and Vanguard International Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard International and Dodge International 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 International Stock are associated (or correlated) with Vanguard International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard International has no effect on the direction of Dodge International i.e., Dodge International and Vanguard International go up and down completely randomly.

Pair Corralation between Dodge International and Vanguard International

Assuming the 90 days horizon Dodge International Stock is expected to generate 0.89 times more return on investment than Vanguard International. However, Dodge International Stock is 1.12 times less risky than Vanguard International. It trades about -0.01 of its potential returns per unit of risk. Vanguard International Value is currently generating about -0.04 per unit of risk. If you would invest  5,308  in Dodge International Stock on September 4, 2024 and sell it today you would lose (29.00) from holding Dodge International Stock or give up 0.55% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

Dodge International Stock  vs.  Vanguard International Value

Dodge International Stock

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dodge International Stock has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Dodge International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Vanguard International

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Dodge International Stock and Vanguard International Value 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.