Correlation Between Dodge Cox and Dodge International

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

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

Diversification Opportunities for Dodge Cox and Dodge International

0.47

Correlation Coefficient

Dodge Cox  Dodge International

Very weak diversification

The 3 months correlation between Dodge and Dodge is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Dodge Cox Income and Dodge International Stock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dodge International Stock 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 Income are associated (or correlated) with Dodge International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dodge International Stock has no effect on the direction of Dodge Cox i.e., Dodge Cox and Dodge International go up and down completely randomly.

Pair Corralation between Dodge Cox and Dodge International

Assuming the 90 days horizon Dodge Cox Income is expected to under-perform the Dodge International. But the mutual fund apears to be less risky and, when comparing its historical volatility, Dodge Cox Income is 2.38 times less risky than Dodge International. The mutual fund trades about -0.15 of its potential returns per unit of risk. The Dodge International Stock is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  5,372  in Dodge International Stock on September 17, 2024 and sell it today you would lose (97.00) from holding Dodge International Stock or give up 1.81% of portfolio value over 90 days.

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

Dodge Cox Income  vs.  Dodge International Stock

Dodge Cox Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dodge Cox Income 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.

Dodge International Stock

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Dodge Cox Income and Dodge International Stock 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.