Correlation Between Dodge Cox and Morgan Stanley

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

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

Diversification Opportunities for Dodge Cox and Morgan Stanley

-0.09

Correlation Coefficient

Dodge Cox  Morgan Stanley

Good diversification

The 3 months correlation between Dodge and Morgan is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Dodge Stock Fund and Morgan Stanley Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morgan Stanley Emerging 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 Stock Fund are associated (or correlated) with Morgan Stanley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Morgan Stanley Emerging has no effect on the direction of Dodge Cox i.e., Dodge Cox and Morgan Stanley go up and down completely randomly.

Pair Corralation between Dodge Cox and Morgan Stanley

Assuming the 90 days horizon Dodge Stock Fund is expected to generate 0.9 times more return on investment than Morgan Stanley. However, Dodge Stock Fund is 1.11 times less risky than Morgan Stanley. It trades about 0.07 of its potential returns per unit of risk. Morgan Stanley Emerging is currently generating about 0.04 per unit of risk. If you would invest  19,962  in Dodge Stock Fund on October 7, 2024 and sell it today you would earn a total of  5,966  from holding Dodge Stock Fund or generate 29.89% return on investment over 90 days.

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

Dodge Stock Fund  vs.  Morgan Stanley Emerging

Dodge Stock Fund

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dodge Stock Fund has generated negative risk-adjusted returns adding no value to fund investors. 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.

Morgan Stanley Emerging

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Morgan Stanley Emerging has generated negative risk-adjusted returns adding no value to fund investors. In spite of rather sound fundamental indicators, Morgan Stanley is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Dodge Cox and Morgan Stanley

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

The idea behind Dodge Stock Fund and Morgan Stanley Emerging 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.