Correlation Between Dodge Income and Dodge Cox

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Can any of the company-specific risk be diversified away by investing in both Dodge Income and Dodge Cox 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 Income and Dodge Cox into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dodge Income Fund and Dodge Cox Emerging, you can compare the effects of market volatilities on Dodge Income and Dodge Cox 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 Income with a short position of Dodge Cox. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dodge Income and Dodge Cox.

Diversification Opportunities for Dodge Income and Dodge Cox

DodgeDodgeDiversified AwayDodgeDodgeDiversified Away100%
0.11
  Correlation Coefficient

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 Income Fund and Dodge Cox Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dodge Cox Emerging and Dodge Income 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 Income Fund are associated (or correlated) with Dodge Cox. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dodge Cox Emerging has no effect on the direction of Dodge Income i.e., Dodge Income and Dodge Cox go up and down completely randomly.

Pair Corralation between Dodge Income and Dodge Cox

Assuming the 90 days horizon Dodge Income is expected to generate 1.19 times less return on investment than Dodge Cox. But when comparing it to its historical volatility, Dodge Income Fund is 1.3 times less risky than Dodge Cox. It trades about 0.09 of its potential returns per unit of risk. Dodge Cox Emerging is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  908.00  in Dodge Cox Emerging on September 17, 2024 and sell it today you would earn a total of  6.00  from holding Dodge Cox Emerging or generate 0.66% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Dodge Income Fund  vs.  Dodge Cox Emerging

 Performance 
JavaScript chart by amCharts 3.21.15OctNovDec 0510
JavaScript chart by amCharts 3.21.15DODIX DODEX
       Timeline  
Dodge Income 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec12.5512.612.6512.712.7512.812.8512.912.95
Dodge Cox Emerging 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
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.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec99.19.29.39.49.59.69.79.89.9

Dodge Income and Dodge Cox Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-0.48-0.28-0.0959-0.0502-0.0068510.03230.07060.150.350.55 1234
JavaScript chart by amCharts 3.21.15DODIX DODEX
       Returns  

Pair Trading with Dodge Income and Dodge Cox

The main advantage of trading using opposite Dodge Income and Dodge Cox positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dodge Income position performs unexpectedly, Dodge Cox 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 Cox will offset losses from the drop in Dodge Cox's long position.
The idea behind Dodge Income Fund and Dodge Cox Emerging 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.

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