Correlation Between Dodge Cox and Dodge Stock

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

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

Diversification Opportunities for Dodge Cox and Dodge Stock

-0.71

Correlation Coefficient

Dodge Cox  Dodge Stock

Pay attention - limited upside

The 3 months correlation between Dodge and Dodge is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Dodge Cox Global and Dodge Stock Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dodge Stock Fund 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 Global are associated (or correlated) with Dodge Stock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dodge Stock Fund has no effect on the direction of Dodge Cox i.e., Dodge Cox and Dodge Stock go up and down completely randomly.

Pair Corralation between Dodge Cox and Dodge Stock

Assuming the 90 days horizon Dodge Cox Global is expected to under-perform the Dodge Stock. But the mutual fund apears to be less risky and, when comparing its historical volatility, Dodge Cox Global is 2.27 times less risky than Dodge Stock. The mutual fund trades about -0.2 of its potential returns per unit of risk. The Dodge Stock Fund is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  27,019  in Dodge Stock Fund on September 17, 2024 and sell it today you would earn a total of  740.00  from holding Dodge Stock Fund or generate 2.74% return on investment over 90 days.

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

Dodge Cox Global  vs.  Dodge Stock Fund

Dodge Cox Global

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dodge Cox Global has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong essential 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 Stock Fund

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Dodge Stock Fund are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Dodge Stock 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 Stock

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

The idea behind Dodge Cox Global and Dodge Stock 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.

Check out your portfolio center.

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.