Correlation Between Dodge Income and Dodge Global

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

Diversification Opportunities for Dodge Income and Dodge Global

0.97

Correlation Coefficient

Dodge Income  Dodge Global

Almost no diversification

The 3 months correlation between Dodge and Dodge is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Dodge Income Fund and Dodge Global Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dodge Global Bond 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 Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dodge Global Bond has no effect on the direction of Dodge Income i.e., Dodge Income and Dodge Global go up and down completely randomly.

Pair Corralation between Dodge Income and Dodge Global

Assuming the 90 days horizon Dodge Income Fund is expected to generate 1.07 times more return on investment than Dodge Global. However, Dodge Income is 1.07 times more volatile than Dodge Global Bond. It trades about -0.12 of its potential returns per unit of risk. Dodge Global Bond is currently generating about -0.15 per unit of risk. If you would invest  1,300  in Dodge Income Fund on September 13, 2024 and sell it today you would lose (32.00) from holding Dodge Income Fund or give up 2.46% of portfolio value over 90 days.

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

Dodge Income Fund  vs.  Dodge Global Bond

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.

Dodge Global Bond

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Dodge Income Fund and Dodge Global Bond 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.