Correlation Between Dodge Cox and Cambiar Opportunity

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

By analyzing existing cross correlation between Dodge Cox Stock and Cambiar Opportunity Fund, you can compare the effects of market volatilities on Dodge Cox and Cambiar Opportunity 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 Cambiar Opportunity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dodge Cox and Cambiar Opportunity.

Diversification Opportunities for Dodge Cox and Cambiar Opportunity

0.94

Correlation Coefficient

Dodge Cox  Cambiar Opportunity

Almost no diversification

The 3 months correlation between Dodge and Cambiar is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Dodge Cox Stock and Cambiar Opportunity Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cambiar Opportunity 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 Cox Stock are associated (or correlated) with Cambiar Opportunity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cambiar Opportunity has no effect on the direction of Dodge Cox i.e., Dodge Cox and Cambiar Opportunity go up and down completely randomly.

Pair Corralation between Dodge Cox and Cambiar Opportunity

Assuming the 90 days horizon Dodge Cox is expected to generate 1.06 times less return on investment than Cambiar Opportunity. In addition to that, Dodge Cox is 1.03 times more volatile than Cambiar Opportunity Fund. It trades about 0.11 of its total potential returns per unit of risk. Cambiar Opportunity Fund is currently generating about 0.12 per unit of volatility. If you would invest  2,909  in Cambiar Opportunity Fund on September 13, 2024 and sell it today you would earn a total of  148.00  from holding Cambiar Opportunity Fund or generate 5.09% return on investment over 90 days.

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

Dodge Cox Stock  vs.  Cambiar Opportunity Fund

Dodge Cox Stock

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dodge Cox Stock are ranked lower than 8 (%) 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.

Cambiar Opportunity

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cambiar Opportunity Fund are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Cambiar Opportunity 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 Cambiar Opportunity

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

The idea behind Dodge Cox Stock and Cambiar Opportunity 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.