Correlation Between Dodge Cox and Smead Funds

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

Diversification Opportunities for Dodge Cox and Smead Funds

0.89

Correlation Coefficient

Dodge Cox  Smead Funds

Very poor diversification

The 3 months correlation between Dodge and Smead is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Dodge Cox International and Smead Funds Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smead Funds Trust 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 Smead Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smead Funds Trust has no effect on the direction of Dodge Cox i.e., Dodge Cox and Smead Funds go up and down completely randomly.

Pair Corralation between Dodge Cox and Smead Funds

Assuming the 90 days horizon Dodge Cox International is expected to generate 0.85 times more return on investment than Smead Funds. However, Dodge Cox International is 1.17 times less risky than Smead Funds. It trades about 0.22 of its potential returns per unit of risk. Smead Funds Trust is currently generating about 0.15 per unit of risk. If you would invest  4,993  in Dodge Cox International on December 28, 2024 and sell it today you would earn a total of  590.00  from holding Dodge Cox International or generate 11.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.36%
Values	Daily Returns

Dodge Cox International  vs.  Smead Funds Trust

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 17 (%) 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.

Smead Funds Trust

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Smead Funds Trust are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak essential indicators, Smead Funds may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Dodge Cox and Smead Funds

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

The idea behind Dodge Cox International and Smead Funds Trust 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.

Check out your portfolio center.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.