Correlation Between Cliffwater Corporate and Dodge Cox

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

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

Diversification Opportunities for Cliffwater Corporate and Dodge Cox

0.88

Correlation Coefficient

Cliffwater Corporate  Dodge Cox

Very poor diversification

The 3 months correlation between Cliffwater and Dodge is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Cliffwater Corporate Lending 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 Cliffwater Corporate 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 Cliffwater Corporate Lending 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 Cliffwater Corporate i.e., Cliffwater Corporate and Dodge Cox go up and down completely randomly.

Pair Corralation between Cliffwater Corporate and Dodge Cox

Assuming the 90 days horizon Cliffwater Corporate is expected to generate 1.48 times less return on investment than Dodge Cox. But when comparing it to its historical volatility, Cliffwater Corporate Lending is 13.88 times less risky than Dodge Cox. It trades about 0.8 of its potential returns per unit of risk. Dodge Cox Stock is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  26,976  in Dodge Cox Stock on September 14, 2024 and sell it today you would earn a total of  967.00  from holding Dodge Cox Stock or generate 3.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

Cliffwater Corporate Lending  vs.  Dodge Cox Stock

Cliffwater Corporate

Risk-Adjusted Performance

62 of 100

Market Crasher

Compared to the overall equity markets, risk-adjusted returns on investments in Cliffwater Corporate Lending are ranked lower than 62 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Cliffwater Corporate 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

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dodge Cox Stock are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. 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 Cliffwater Corporate and Dodge Cox

The main advantage of trading using opposite Cliffwater Corporate and Dodge Cox positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cliffwater Corporate 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 Cliffwater Corporate Lending 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.