Correlation Between Dodge Cox and Westwood Low

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

Diversification Opportunities for Dodge Cox and Westwood Low

0.54

Correlation Coefficient

Dodge Cox  Westwood Low

Very weak diversification

The 3 months correlation between Dodge and Westwood is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Dodge Cox Stock and Westwood Low Volatility in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westwood Low Volatility 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 Westwood Low. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Westwood Low Volatility has no effect on the direction of Dodge Cox i.e., Dodge Cox and Westwood Low go up and down completely randomly.

Pair Corralation between Dodge Cox and Westwood Low

If you would invest  602.00  in Westwood Low Volatility on September 21, 2024 and sell it today you would earn a total of  0.00  from holding Westwood Low Volatility or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	1.59%
Values	Daily Returns

Dodge Cox Stock  vs.  Westwood Low Volatility

Dodge Cox Stock

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dodge Cox Stock has generated negative risk-adjusted returns adding no value to fund investors. 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.

Westwood Low Volatility

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Westwood Low Volatility has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Westwood Low 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 Westwood Low

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

The idea behind Dodge Cox Stock and Westwood Low Volatility 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.