Correlation Between Dodge Cox and Thrivent Large

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

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

Diversification Opportunities for Dodge Cox and Thrivent Large

0.66

Correlation Coefficient

Dodge Cox  Thrivent Large

Poor diversification

The 3 months correlation between Dodge and Thrivent is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Dodge Cox Stock and Thrivent Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thrivent Large Cap 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 Stock are associated (or correlated) with Thrivent Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thrivent Large Cap has no effect on the direction of Dodge Cox i.e., Dodge Cox and Thrivent Large go up and down completely randomly.

Pair Corralation between Dodge Cox and Thrivent Large

Assuming the 90 days horizon Dodge Cox Stock is expected to generate 0.63 times more return on investment than Thrivent Large. However, Dodge Cox Stock is 1.59 times less risky than Thrivent Large. It trades about -0.01 of its potential returns per unit of risk. Thrivent Large Cap is currently generating about -0.14 per unit of risk. If you would invest  27,455  in Dodge Cox Stock on November 29, 2024 and sell it today you would lose (188.00) from holding Dodge Cox Stock or give up 0.68% of portfolio value over 90 days.

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

Dodge Cox Stock  vs.  Thrivent Large Cap

Dodge Cox Stock

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dodge Cox Stock 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.

Thrivent Large Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Thrivent Large Cap 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.

Pair Trading with Dodge Cox and Thrivent Large

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

The idea behind Dodge Cox Stock and Thrivent Large Cap 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.