Correlation Between Dodge Cox and Parametric International

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

Diversification Opportunities for Dodge Cox and Parametric International

0.51

Correlation Coefficient

Dodge Cox  Parametric International

Very weak diversification

The 3 months correlation between Dodge and Parametric is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Dodge Cox Stock and Parametric International Equit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Parametric International 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 Parametric International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Parametric International has no effect on the direction of Dodge Cox i.e., Dodge Cox and Parametric International go up and down completely randomly.

Pair Corralation between Dodge Cox and Parametric International

Assuming the 90 days horizon Dodge Cox is expected to generate 5.25 times less return on investment than Parametric International. In addition to that, Dodge Cox is 1.18 times more volatile than Parametric International Equity. It trades about 0.03 of its total potential returns per unit of risk. Parametric International Equity is currently generating about 0.2 per unit of volatility. If you would invest  1,370  in Parametric International Equity on December 29, 2024 and sell it today you would earn a total of  122.00  from holding Parametric International Equity or generate 8.91% return on investment over 90 days.

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

Dodge Cox Stock  vs.  Parametric International Equit

Dodge Cox Stock

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Dodge Cox Stock are ranked lower than 2 (%) 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.

Parametric International

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Parametric International Equity are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Parametric International may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Dodge Cox and Parametric International

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

The idea behind Dodge Cox Stock and Parametric International 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.