Correlation Between Dodge Cox and Nasdaq-100(r)

Can any of the company-specific risk be diversified away by investing in both Dodge Cox and Nasdaq-100(r) 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 Nasdaq-100(r) 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 Nasdaq 100 2x Strategy, you can compare the effects of market volatilities on Dodge Cox and Nasdaq-100(r) 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 Nasdaq-100(r). Check out your portfolio center. Please also check ongoing floating volatility patterns of Dodge Cox and Nasdaq-100(r).

Diversification Opportunities for Dodge Cox and Nasdaq-100(r)

0.32

Correlation Coefficient

Dodge Cox  Nasdaq-100(r)

Weak diversification

The 3 months correlation between Dodge and Nasdaq-100(r) is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Dodge Cox Emerging and Nasdaq 100 2x Strategy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nasdaq 100 2x 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 Nasdaq-100(r). Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nasdaq 100 2x has no effect on the direction of Dodge Cox i.e., Dodge Cox and Nasdaq-100(r) go up and down completely randomly.

Pair Corralation between Dodge Cox and Nasdaq-100(r)

Assuming the 90 days horizon Dodge Cox Emerging is expected to generate 0.28 times more return on investment than Nasdaq-100(r). However, Dodge Cox Emerging is 3.56 times less risky than Nasdaq-100(r). It trades about 0.06 of its potential returns per unit of risk. Nasdaq 100 2x Strategy is currently generating about -0.06 per unit of risk. If you would invest  889.00  in Dodge Cox Emerging on December 1, 2024 and sell it today you would earn a total of  21.00  from holding Dodge Cox Emerging or generate 2.36% return on investment over 90 days.

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

Dodge Cox Emerging  vs.  Nasdaq 100 2x Strategy

Dodge Cox Emerging

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Dodge Cox Emerging are ranked lower than 4 (%) 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.

Nasdaq 100 2x

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nasdaq 100 2x Strategy has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Dodge Cox and Nasdaq-100(r)

The main advantage of trading using opposite Dodge Cox and Nasdaq-100(r) positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dodge Cox position performs unexpectedly, Nasdaq-100(r) 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 Nasdaq-100(r) will offset losses from the drop in Nasdaq-100(r)'s long position.

The idea behind Dodge Cox Emerging and Nasdaq 100 2x Strategy 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.