Correlation Between Ford and Dodge Cox

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

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

Diversification Opportunities for Ford and Dodge Cox

-0.37

Correlation Coefficient

Ford  Dodge Cox

Very good diversification

The 3 months correlation between Ford and Dodge is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Dodge Cox International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dodge Cox International and Ford 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 Ford Motor are associated (or correlated) with Dodge Cox. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dodge Cox International has no effect on the direction of Ford i.e., Ford and Dodge Cox go up and down completely randomly.

Pair Corralation between Ford and Dodge Cox

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Dodge Cox. In addition to that, Ford is 2.62 times more volatile than Dodge Cox International. It trades about -0.05 of its total potential returns per unit of risk. Dodge Cox International is currently generating about -0.03 per unit of volatility. If you would invest  5,366  in Dodge Cox International on September 18, 2024 and sell it today you would lose (85.00) from holding Dodge Cox International or give up 1.58% of portfolio value over 90 days.

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

Ford Motor  vs.  Dodge Cox International

Ford Motor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ford Motor has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Dodge Cox International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dodge Cox International 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.

Pair Trading with Ford and Dodge Cox

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

The idea behind Ford Motor and Dodge Cox International 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.