Correlation Between Dodge Cox and Value Fund

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

Diversification Opportunities for Dodge Cox and Value Fund

0.96

Correlation Coefficient

Dodge Cox  Value Fund

Almost no diversification

The 3 months correlation between Dodge and Value is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Dodge Cox Stock and Value Fund I in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Value Fund I 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 Value Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Value Fund I has no effect on the direction of Dodge Cox i.e., Dodge Cox and Value Fund go up and down completely randomly.

Pair Corralation between Dodge Cox and Value Fund

Assuming the 90 days horizon Dodge Cox Stock is expected to generate 1.07 times more return on investment than Value Fund. However, Dodge Cox is 1.07 times more volatile than Value Fund I. It trades about 0.11 of its potential returns per unit of risk. Value Fund I is currently generating about 0.09 per unit of risk. If you would invest  25,343  in Dodge Cox Stock on September 3, 2024 and sell it today you would earn a total of  3,462  from holding Dodge Cox Stock or generate 13.66% return on investment over 90 days.

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

Dodge Cox Stock  vs.  Value Fund I

Dodge Cox Stock

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dodge Cox Stock are ranked lower than 11 (%) 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 January 2025.

Value Fund I

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Value Fund I are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Value Fund 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 Value Fund

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

The idea behind Dodge Cox Stock and Value Fund I 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.