Correlation Between Dodge Cox and Davidson Multi

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

Diversification Opportunities for Dodge Cox and Davidson Multi

0.91

Correlation Coefficient

Dodge Cox  Davidson Multi

Almost no diversification

The 3 months correlation between Dodge and Davidson is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Dodge Cox Stock and Davidson Multi Cap Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Davidson Multi 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 Davidson Multi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Davidson Multi Cap has no effect on the direction of Dodge Cox i.e., Dodge Cox and Davidson Multi go up and down completely randomly.

Pair Corralation between Dodge Cox and Davidson Multi

Assuming the 90 days horizon Dodge Cox Stock is expected to under-perform the Davidson Multi. But the mutual fund apears to be less risky and, when comparing its historical volatility, Dodge Cox Stock is 1.28 times less risky than Davidson Multi. The mutual fund trades about -0.12 of its potential returns per unit of risk. The Davidson Multi Cap Equity is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  3,432  in Davidson Multi Cap Equity on September 16, 2024 and sell it today you would earn a total of  91.00  from holding Davidson Multi Cap Equity or generate 2.65% 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.  Davidson Multi Cap Equity

Dodge Cox Stock

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Dodge Cox Stock are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. 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.

Davidson Multi Cap

Risk-Adjusted Performance

10 of 100

OK

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

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

The idea behind Dodge Cox Stock and Davidson Multi Cap Equity 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.