Correlation Between Dodge Cox and Regional Bank

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

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

Diversification Opportunities for Dodge Cox and Regional Bank

-0.32

Correlation Coefficient

Dodge Cox  Regional Bank

Very good diversification

The 3 months correlation between Dodge and Regional is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Dodge Cox Emerging and Regional Bank Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Regional Bank 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 Emerging are associated (or correlated) with Regional Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Regional Bank has no effect on the direction of Dodge Cox i.e., Dodge Cox and Regional Bank go up and down completely randomly.

Pair Corralation between Dodge Cox and Regional Bank

Assuming the 90 days horizon Dodge Cox Emerging is expected to generate 0.66 times more return on investment than Regional Bank. However, Dodge Cox Emerging is 1.52 times less risky than Regional Bank. It trades about 0.12 of its potential returns per unit of risk. Regional Bank Fund is currently generating about -0.07 per unit of risk. If you would invest  871.00  in Dodge Cox Emerging on December 29, 2024 and sell it today you would earn a total of  55.00  from holding Dodge Cox Emerging or generate 6.31% return on investment over 90 days.

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

Dodge Cox Emerging  vs.  Regional Bank Fund

Dodge Cox Emerging

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dodge Cox Emerging are ranked lower than 9 (%) 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 April 2025.

Regional Bank

Risk-Adjusted Performance

Very Weak

Over the last 90 days Regional Bank Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Regional Bank 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 Regional Bank

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

The idea behind Dodge Cox Emerging and Regional Bank 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 Transaction History module to view history of all your transactions and understand their impact on performance.