Correlation Between Dodge Cox and Mainstay Moderate

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

Diversification Opportunities for Dodge Cox and Mainstay Moderate

0.68

Correlation Coefficient

Dodge Cox  Mainstay Moderate

Poor diversification

The 3 months correlation between Dodge and Mainstay is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Dodge Cox Stock and Mainstay Moderate Allocation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mainstay Moderate 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 Mainstay Moderate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mainstay Moderate has no effect on the direction of Dodge Cox i.e., Dodge Cox and Mainstay Moderate go up and down completely randomly.

Pair Corralation between Dodge Cox and Mainstay Moderate

Assuming the 90 days horizon Dodge Cox Stock is expected to generate 1.65 times more return on investment than Mainstay Moderate. However, Dodge Cox is 1.65 times more volatile than Mainstay Moderate Allocation. It trades about 0.07 of its potential returns per unit of risk. Mainstay Moderate Allocation is currently generating about 0.1 per unit of risk. If you would invest  22,453  in Dodge Cox Stock on September 28, 2024 and sell it today you would earn a total of  3,598  from holding Dodge Cox Stock or generate 16.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.63%
Values	Daily Returns

Dodge Cox Stock  vs.  Mainstay Moderate Allocation

Dodge Cox Stock

Risk-Adjusted Performance

0 of 100

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.

Mainstay Moderate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mainstay Moderate Allocation has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Mainstay Moderate 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 Mainstay Moderate

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

The idea behind Dodge Cox Stock and Mainstay Moderate Allocation 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.