Correlation Between Dodge Cox and Pzena International

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

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

Diversification Opportunities for Dodge Cox and Pzena International

0.75

Correlation Coefficient

Dodge Cox  Pzena International

Poor diversification

The 3 months correlation between Dodge and Pzena is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Dodge Cox International and Pzena International Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pzena International Value 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 Cox International are associated (or correlated) with Pzena International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pzena International Value has no effect on the direction of Dodge Cox i.e., Dodge Cox and Pzena International go up and down completely randomly.

Pair Corralation between Dodge Cox and Pzena International

Assuming the 90 days horizon Dodge Cox is expected to generate 1.15 times less return on investment than Pzena International. But when comparing it to its historical volatility, Dodge Cox International is 1.24 times less risky than Pzena International. It trades about 0.21 of its potential returns per unit of risk. Pzena International Value is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  1,010  in Pzena International Value on December 27, 2024 and sell it today you would earn a total of  131.00  from holding Pzena International Value or generate 12.97% return on investment over 90 days.

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

Dodge Cox International  vs.  Pzena International Value

Dodge Cox International

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Dodge Cox International are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Dodge Cox may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pzena International Value

Risk-Adjusted Performance

Solid

Over the last 90 days Pzena International Value has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly weak basic indicators, Pzena International showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dodge Cox and Pzena International

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

The idea behind Dodge Cox International and Pzena International Value 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.