Correlation Between Dodge Cox and KKR Co

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

By analyzing existing cross correlation between Dodge Global Stock and KKR Co LP, you can compare the effects of market volatilities on Dodge Cox and KKR Co 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 KKR Co. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dodge Cox and KKR Co.

Diversification Opportunities for Dodge Cox and KKR Co

-0.49

Correlation Coefficient

Dodge Cox  KKR Co

Very good diversification

The 3 months correlation between Dodge and KKR is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Dodge Global Stock and KKR Co LP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KKR Co LP 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 Global Stock are associated (or correlated) with KKR Co. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KKR Co LP has no effect on the direction of Dodge Cox i.e., Dodge Cox and KKR Co go up and down completely randomly.

Pair Corralation between Dodge Cox and KKR Co

Assuming the 90 days horizon Dodge Global Stock is expected to generate 0.27 times more return on investment than KKR Co. However, Dodge Global Stock is 3.72 times less risky than KKR Co. It trades about 0.15 of its potential returns per unit of risk. KKR Co LP is currently generating about -0.12 per unit of risk. If you would invest  1,380  in Dodge Global Stock on December 27, 2024 and sell it today you would earn a total of  101.00  from holding Dodge Global Stock or generate 7.32% return on investment over 90 days.

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

Dodge Global Stock  vs.  KKR Co LP

Dodge Global Stock

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dodge Global Stock are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Dodge Cox may actually be approaching a critical reversion point that can send shares even higher in April 2025.

KKR Co LP

Risk-Adjusted Performance

Very Weak

Over the last 90 days KKR Co LP has generated negative risk-adjusted returns adding no value to investors with long positions. Even with fragile performance in the last few months, the Stock's forward-looking signals remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Dodge Cox and KKR Co

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

The idea behind Dodge Global Stock and KKR Co LP 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.