Correlation Between Dodge Cox and International Equity

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

Diversification Opportunities for Dodge Cox and International Equity

0.82

Correlation Coefficient

Dodge Cox  International Equity

Very poor diversification

The 3 months correlation between Dodge and International is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Dodge International Stock and International Equity Series in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Equity 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 International Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Equity has no effect on the direction of Dodge Cox i.e., Dodge Cox and International Equity go up and down completely randomly.

Pair Corralation between Dodge Cox and International Equity

Assuming the 90 days horizon Dodge International Stock is expected to generate 0.22 times more return on investment than International Equity. However, Dodge International Stock is 4.65 times less risky than International Equity. It trades about -0.44 of its potential returns per unit of risk. International Equity Series is currently generating about -0.3 per unit of risk. If you would invest  5,259  in Dodge International Stock on October 8, 2024 and sell it today you would lose (274.00) from holding Dodge International Stock or give up 5.21% of portfolio value over 90 days.

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

Dodge International Stock  vs.  International Equity Series

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.

International Equity

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days International Equity Series 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 basic 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 International Equity

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

The idea behind Dodge International Stock and International Equity Series 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 Transaction History module to view history of all your transactions and understand their impact on performance.