Correlation Between Dodge Cox and Strategic Advisers

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

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

Diversification Opportunities for Dodge Cox and Strategic Advisers

1.0

Correlation Coefficient

Dodge Cox  Strategic Advisers

No risk reduction

The 3 months correlation between Dodge and Strategic is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Dodge Income Fund and Strategic Advisers Fidelity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Strategic Advisers 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 Income Fund are associated (or correlated) with Strategic Advisers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Strategic Advisers has no effect on the direction of Dodge Cox i.e., Dodge Cox and Strategic Advisers go up and down completely randomly.

Pair Corralation between Dodge Cox and Strategic Advisers

Assuming the 90 days horizon Dodge Income Fund is expected to generate 1.03 times more return on investment than Strategic Advisers. However, Dodge Cox is 1.03 times more volatile than Strategic Advisers Fidelity. It trades about -0.02 of its potential returns per unit of risk. Strategic Advisers Fidelity is currently generating about -0.04 per unit of risk. If you would invest  1,282  in Dodge Income Fund on September 2, 2024 and sell it today you would lose (7.00) from holding Dodge Income Fund or give up 0.55% of portfolio value over 90 days.

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

Dodge Income Fund  vs.  Strategic Advisers Fidelity

Dodge Income

Risk-Adjusted Performance

0 of 100

Very Weak

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

Strategic Advisers

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Strategic Advisers Fidelity has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Strategic Advisers 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 Strategic Advisers

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

The idea behind Dodge Income Fund and Strategic Advisers Fidelity 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 Global Correlations module to find global opportunities by holding instruments from different markets.