Correlation Between Dodge Cox and Zacks Dividend

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

Diversification Opportunities for Dodge Cox and Zacks Dividend

0.98

Correlation Coefficient

Dodge Cox  Zacks Dividend

Almost no diversification

The 3 months correlation between Dodge and Zacks is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Dodge Stock Fund and Zacks Dividend Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zacks Dividend 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 Zacks Dividend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zacks Dividend has no effect on the direction of Dodge Cox i.e., Dodge Cox and Zacks Dividend go up and down completely randomly.

Pair Corralation between Dodge Cox and Zacks Dividend

Assuming the 90 days horizon Dodge Stock Fund is expected to under-perform the Zacks Dividend. In addition to that, Dodge Cox is 1.35 times more volatile than Zacks Dividend Fund. It trades about -0.05 of its total potential returns per unit of risk. Zacks Dividend Fund is currently generating about -0.07 per unit of volatility. If you would invest  2,725  in Zacks Dividend Fund on December 2, 2024 and sell it today you would lose (91.00) from holding Zacks Dividend Fund or give up 3.34% of portfolio value over 90 days.

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

Dodge Stock Fund  vs.  Zacks Dividend Fund

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.

Zacks Dividend

Risk-Adjusted Performance

Very Weak

Over the last 90 days Zacks Dividend Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Zacks Dividend 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 Zacks Dividend

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

The idea behind Dodge Stock Fund and Zacks Dividend Fund 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.