Correlation Between Dodge Cox and Parnassus Fixed

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

Diversification Opportunities for Dodge Cox and Parnassus Fixed

0.95

Correlation Coefficient

Dodge Cox  Parnassus Fixed

Almost no diversification

The 3 months correlation between Dodge and Parnassus is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Dodge Income Fund and Parnassus Fixed Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Parnassus Fixed 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 Income Fund are associated (or correlated) with Parnassus Fixed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Parnassus Fixed Income has no effect on the direction of Dodge Cox i.e., Dodge Cox and Parnassus Fixed go up and down completely randomly.

Pair Corralation between Dodge Cox and Parnassus Fixed

Assuming the 90 days horizon Dodge Income Fund is expected to generate 1.21 times more return on investment than Parnassus Fixed. However, Dodge Cox is 1.21 times more volatile than Parnassus Fixed Income. It trades about -0.03 of its potential returns per unit of risk. Parnassus Fixed Income is currently generating about -0.04 per unit of risk. If you would invest  1,282  in Dodge Income Fund on September 1, 2024 and sell it today you would lose (7.00) from holding Dodge Income Fund or give up 0.55% 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.  Parnassus Fixed Income

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 Cox is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Parnassus Fixed Income

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Dodge Income Fund and Parnassus Fixed Income 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.