Correlation Between Dodge Cox and Ppm Core

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

Diversification Opportunities for Dodge Cox and Ppm Core

0.4

Correlation Coefficient

Dodge Cox  Ppm Core

Very weak diversification

The 3 months correlation between Dodge and Ppm is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Dodge Stock Fund and Ppm Core Plus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ppm Core Plus 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 Ppm Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ppm Core Plus has no effect on the direction of Dodge Cox i.e., Dodge Cox and Ppm Core go up and down completely randomly.

Pair Corralation between Dodge Cox and Ppm Core

Assuming the 90 days horizon Dodge Stock Fund is expected to under-perform the Ppm Core. In addition to that, Dodge Cox is 13.27 times more volatile than Ppm Core Plus. It trades about -0.06 of its total potential returns per unit of risk. Ppm Core Plus is currently generating about 0.04 per unit of volatility. If you would invest  869.00  in Ppm Core Plus on December 4, 2024 and sell it today you would earn a total of  1.00  from holding Ppm Core Plus or generate 0.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	62.71%
Values	Daily Returns

Dodge Stock Fund  vs.  Ppm Core Plus

Dodge Stock Fund

Risk-Adjusted Performance

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.

Ppm Core Plus

Risk-Adjusted Performance

Weak

Over the last 90 days Ppm Core Plus has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Ppm Core is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Dodge Cox and Ppm Core

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

The idea behind Dodge Stock Fund and Ppm Core Plus 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.