Correlation Between Dodge Cox and Pimco Rae

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

By analyzing existing cross correlation between Dodge International Stock and Pimco Rae Fundamental, you can compare the effects of market volatilities on Dodge Cox and Pimco Rae 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 Pimco Rae. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dodge Cox and Pimco Rae.

Diversification Opportunities for Dodge Cox and Pimco Rae

0.95

Correlation Coefficient

Dodge Cox  Pimco Rae

Almost no diversification

The 3 months correlation between Dodge and Pimco is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Dodge International Stock and Pimco Rae Fundamental in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pimco Rae Fundamental 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 International Stock are associated (or correlated) with Pimco Rae. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pimco Rae Fundamental has no effect on the direction of Dodge Cox i.e., Dodge Cox and Pimco Rae go up and down completely randomly.

Pair Corralation between Dodge Cox and Pimco Rae

Assuming the 90 days horizon Dodge International Stock is expected to generate 0.96 times more return on investment than Pimco Rae. However, Dodge International Stock is 1.05 times less risky than Pimco Rae. It trades about 0.03 of its potential returns per unit of risk. Pimco Rae Fundamental is currently generating about -0.01 per unit of risk. If you would invest  4,749  in Dodge International Stock on October 7, 2024 and sell it today you would earn a total of  236.00  from holding Dodge International Stock or generate 4.97% return on investment over 90 days.

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

Dodge International Stock  vs.  Pimco Rae Fundamental

Dodge International Stock

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pimco Rae Fundamental

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pimco Rae Fundamental 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 forward 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.

Pair Trading with Dodge Cox and Pimco Rae

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

The idea behind Dodge International Stock and Pimco Rae Fundamental 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.