Correlation Between Health Biotchnology and Dodge Cox

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

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

Diversification Opportunities for Health Biotchnology and Dodge Cox

-0.47

Correlation Coefficient

Health Biotchnology  Dodge Cox

Very good diversification

The 3 months correlation between HEALTH and Dodge is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Health Biotchnology Portfolio and Dodge Cox Stock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dodge Cox Stock and Health Biotchnology 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 Health Biotchnology Portfolio 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 Stock has no effect on the direction of Health Biotchnology i.e., Health Biotchnology and Dodge Cox go up and down completely randomly.

Pair Corralation between Health Biotchnology and Dodge Cox

Assuming the 90 days horizon Health Biotchnology Portfolio is expected to under-perform the Dodge Cox. In addition to that, Health Biotchnology is 1.1 times more volatile than Dodge Cox Stock. It trades about -0.1 of its total potential returns per unit of risk. Dodge Cox Stock is currently generating about 0.15 per unit of volatility. If you would invest  26,978  in Dodge Cox Stock on September 3, 2024 and sell it today you would earn a total of  1,827  from holding Dodge Cox Stock or generate 6.77% return on investment over 90 days.

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

Health Biotchnology Portfolio  vs.  Dodge Cox Stock

Health Biotchnology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Health Biotchnology Portfolio has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Health Biotchnology is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Dodge Cox Stock

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dodge Cox Stock are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Dodge Cox may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Health Biotchnology and Dodge Cox

The main advantage of trading using opposite Health Biotchnology and Dodge Cox positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Health Biotchnology 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 Health Biotchnology Portfolio and Dodge Cox 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.