Correlation Between Dodge Cox and Silvercorp Metals

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

Diversification Opportunities for Dodge Cox and Silvercorp Metals

0.61

Correlation Coefficient

Dodge Cox  Silvercorp Metals

Poor diversification

The 3 months correlation between Dodge and Silvercorp is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Dodge Global Stock and Silvercorp Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Silvercorp Metals 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 Silvercorp Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Silvercorp Metals has no effect on the direction of Dodge Cox i.e., Dodge Cox and Silvercorp Metals go up and down completely randomly.

Pair Corralation between Dodge Cox and Silvercorp Metals

Assuming the 90 days horizon Dodge Cox is expected to generate 3.94 times less return on investment than Silvercorp Metals. But when comparing it to its historical volatility, Dodge Global Stock is 4.81 times less risky than Silvercorp Metals. It trades about 0.29 of its potential returns per unit of risk. Silvercorp Metals is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  317.00  in Silvercorp Metals on November 19, 2024 and sell it today you would earn a total of  45.00  from holding Silvercorp Metals or generate 14.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

Dodge Global Stock  vs.  Silvercorp Metals

Dodge Global Stock

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dodge Global Stock has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Silvercorp Metals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Silvercorp Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Dodge Cox and Silvercorp Metals

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

The idea behind Dodge Global Stock and Silvercorp Metals 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 Anywhere module to track or share privately all of your investments from the convenience of any device.