Correlation Between Dodge Cox and Amer Beacon

Can any of the company-specific risk be diversified away by investing in both Dodge Cox and Amer Beacon 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 Amer Beacon 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 Amer Beacon Garcia, you can compare the effects of market volatilities on Dodge Cox and Amer Beacon 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 Amer Beacon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dodge Cox and Amer Beacon.

Diversification Opportunities for Dodge Cox and Amer Beacon

0.79

Correlation Coefficient

Dodge Cox  Amer Beacon

Poor diversification

The 3 months correlation between Dodge and Amer is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Dodge Cox Emerging and Amer Beacon Garcia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amer Beacon Garcia 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 Amer Beacon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amer Beacon Garcia has no effect on the direction of Dodge Cox i.e., Dodge Cox and Amer Beacon go up and down completely randomly.

Pair Corralation between Dodge Cox and Amer Beacon

Assuming the 90 days horizon Dodge Cox Emerging is expected to under-perform the Amer Beacon. In addition to that, Dodge Cox is 2.65 times more volatile than Amer Beacon Garcia. It trades about -0.27 of its total potential returns per unit of risk. Amer Beacon Garcia is currently generating about -0.49 per unit of volatility. If you would invest  866.00  in Amer Beacon Garcia on October 5, 2024 and sell it today you would lose (29.00) from holding Amer Beacon Garcia or give up 3.35% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

Dodge Cox Emerging  vs.  Amer Beacon Garcia

Dodge Cox Emerging

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dodge Cox Emerging has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's technical and fundamental indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Amer Beacon Garcia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Amer Beacon Garcia has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Amer Beacon 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 Amer Beacon

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

The idea behind Dodge Cox Emerging and Amer Beacon Garcia 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.