Correlation Between Dodge Cox and Metropolitan West

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

Diversification Opportunities for Dodge Cox and Metropolitan West

0.97

Correlation Coefficient

Dodge Cox  Metropolitan West

Almost no diversification

The 3 months correlation between Dodge and Metropolitan is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Dodge Income Fund and Metropolitan West Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metropolitan West 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 Metropolitan West. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metropolitan West has no effect on the direction of Dodge Cox i.e., Dodge Cox and Metropolitan West go up and down completely randomly.

Pair Corralation between Dodge Cox and Metropolitan West

Assuming the 90 days horizon Dodge Cox is expected to generate 1.5 times less return on investment than Metropolitan West. In addition to that, Dodge Cox is 1.51 times more volatile than Metropolitan West Investment. It trades about 0.07 of its total potential returns per unit of risk. Metropolitan West Investment is currently generating about 0.16 per unit of volatility. If you would invest  766.00  in Metropolitan West Investment on December 30, 2024 and sell it today you would earn a total of  18.00  from holding Metropolitan West Investment or generate 2.35% return on investment over 90 days.

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

Dodge Income Fund  vs.  Metropolitan West Investment

Dodge Income

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Dodge Income Fund are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. 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.

Metropolitan West

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Metropolitan West Investment are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Metropolitan West 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 Metropolitan West

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

The idea behind Dodge Income Fund and Metropolitan West Investment 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 CEOs Directory module to screen CEOs from public companies around the world.