Correlation Between Dodge Income and Elfun Income

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

Diversification Opportunities for Dodge Income and Elfun Income

0.99

Correlation Coefficient

Dodge Income  Elfun Income

No risk reduction

The 3 months correlation between Dodge and Elfun is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Dodge Income Fund and Elfun Income Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elfun Income 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 Elfun Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elfun Income has no effect on the direction of Dodge Income i.e., Dodge Income and Elfun Income go up and down completely randomly.

Pair Corralation between Dodge Income and Elfun Income

Assuming the 90 days horizon Dodge Income Fund is expected to generate 0.96 times more return on investment than Elfun Income. However, Dodge Income Fund is 1.05 times less risky than Elfun Income. It trades about -0.1 of its potential returns per unit of risk. Elfun Income Fund 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 (27.00) from holding Dodge Income Fund or give up 2.08% of portfolio value over 90 days.

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

Dodge Income Fund  vs.  Elfun Income Fund

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.

Elfun Income

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Dodge Income Fund and Elfun 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.