Correlation Between Dodge Cox and Templeton Foreign

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

Diversification Opportunities for Dodge Cox and Templeton Foreign

0.88

Correlation Coefficient

Dodge Cox  Templeton Foreign

Very poor diversification

The 3 months correlation between Dodge and Templeton is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Dodge Cox International and Templeton Foreign Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Templeton Foreign 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 Templeton Foreign. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Templeton Foreign has no effect on the direction of Dodge Cox i.e., Dodge Cox and Templeton Foreign go up and down completely randomly.

Pair Corralation between Dodge Cox and Templeton Foreign

Assuming the 90 days horizon Dodge Cox International is expected to under-perform the Templeton Foreign. But the mutual fund apears to be less risky and, when comparing its historical volatility, Dodge Cox International is 1.41 times less risky than Templeton Foreign. The mutual fund trades about -0.15 of its potential returns per unit of risk. The Templeton Foreign Fund is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  816.00  in Templeton Foreign Fund on August 31, 2024 and sell it today you would lose (17.00) from holding Templeton Foreign Fund or give up 2.08% of portfolio value over 90 days.

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

Dodge Cox International  vs.  Templeton Foreign Fund

Dodge Cox International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dodge Cox International has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Dodge Cox is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Templeton Foreign

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Templeton Foreign Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Templeton Foreign 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 Templeton Foreign

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

The idea behind Dodge Cox International and Templeton Foreign Fund 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.