Correlation Between Dodge Cox and Dana Large

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

Diversification Opportunities for Dodge Cox and Dana Large

0.94

Correlation Coefficient

Dodge Cox  Dana Large

Almost no diversification

The 3 months correlation between Dodge and Dana is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Dodge Cox Stock and Dana Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dana 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 Dana Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dana Large Cap has no effect on the direction of Dodge Cox i.e., Dodge Cox and Dana Large go up and down completely randomly.

Pair Corralation between Dodge Cox and Dana Large

Assuming the 90 days horizon Dodge Cox is expected to generate 1.32 times less return on investment than Dana Large. But when comparing it to its historical volatility, Dodge Cox Stock is 1.14 times less risky than Dana Large. It trades about 0.11 of its potential returns per unit of risk. Dana Large Cap is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  2,526  in Dana Large Cap on August 30, 2024 and sell it today you would earn a total of  173.00  from holding Dana Large Cap or generate 6.85% 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.  Dana Large Cap

Dodge Cox Stock

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dodge Cox Stock are ranked lower than 8 (%) 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.

Dana Large Cap

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dana Large Cap are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Dana Large may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Dodge Cox and Dana Large

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

The idea behind Dodge Cox Stock and Dana 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.