Correlation Between Dodge Cox and Pace Large

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

Diversification Opportunities for Dodge Cox and Pace Large

0.83

Correlation Coefficient

Dodge Cox  Pace Large

Very poor diversification

The 3 months correlation between Dodge and PACE is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Dodge Cox Stock and Pace Large Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pace Large Value 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 Pace Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pace Large Value has no effect on the direction of Dodge Cox i.e., Dodge Cox and Pace Large go up and down completely randomly.

Pair Corralation between Dodge Cox and Pace Large

Assuming the 90 days horizon Dodge Cox is expected to generate 1.22 times less return on investment than Pace Large. In addition to that, Dodge Cox is 1.1 times more volatile than Pace Large Value. It trades about 0.07 of its total potential returns per unit of risk. Pace Large Value is currently generating about 0.09 per unit of volatility. If you would invest  2,027  in Pace Large Value on December 28, 2024 and sell it today you would earn a total of  79.00  from holding Pace Large Value or generate 3.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.36%
Values	Daily Returns

Dodge Cox Stock  vs.  Pace Large Value

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 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.

Pace Large Value

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pace Large Value are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Pace Large 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 Pace Large

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

The idea behind Dodge Cox Stock and Pace Large Value 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.