Correlation Between Dodge Cox and Gotham Enhanced

Can any of the company-specific risk be diversified away by investing in both Dodge Cox and Gotham Enhanced 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 Gotham Enhanced 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 Gotham Enhanced 500, you can compare the effects of market volatilities on Dodge Cox and Gotham Enhanced 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 Gotham Enhanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dodge Cox and Gotham Enhanced.

Diversification Opportunities for Dodge Cox and Gotham Enhanced

0.66

Correlation Coefficient

Dodge Cox  Gotham Enhanced

Poor diversification

The 3 months correlation between Dodge and Gotham is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Dodge Stock Fund and Gotham Enhanced 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gotham Enhanced 500 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 Gotham Enhanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gotham Enhanced 500 has no effect on the direction of Dodge Cox i.e., Dodge Cox and Gotham Enhanced go up and down completely randomly.

Pair Corralation between Dodge Cox and Gotham Enhanced

Assuming the 90 days horizon Dodge Stock Fund is expected to generate 0.77 times more return on investment than Gotham Enhanced. However, Dodge Stock Fund is 1.31 times less risky than Gotham Enhanced. It trades about 0.07 of its potential returns per unit of risk. Gotham Enhanced 500 is currently generating about 0.05 per unit of risk. If you would invest  20,071  in Dodge Stock Fund on October 12, 2024 and sell it today you would earn a total of  5,890  from holding Dodge Stock Fund or generate 29.35% return on investment over 90 days.

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

Dodge Stock Fund  vs.  Gotham Enhanced 500

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.

Gotham Enhanced 500

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gotham Enhanced 500 has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic 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 Gotham Enhanced

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

The idea behind Dodge Stock Fund and Gotham Enhanced 500 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.