Correlation Between Dodge Cox and Deutsche Small

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

Diversification Opportunities for Dodge Cox and Deutsche Small

0.74

Correlation Coefficient

Dodge Cox  Deutsche Small

Poor diversification

The 3 months correlation between Dodge and Deutsche is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Dodge Cox Stock and Deutsche Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deutsche Small 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 Deutsche Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deutsche Small Cap has no effect on the direction of Dodge Cox i.e., Dodge Cox and Deutsche Small go up and down completely randomly.

Pair Corralation between Dodge Cox and Deutsche Small

Assuming the 90 days horizon Dodge Cox Stock is expected to generate 0.61 times more return on investment than Deutsche Small. However, Dodge Cox Stock is 1.63 times less risky than Deutsche Small. It trades about 0.05 of its potential returns per unit of risk. Deutsche Small Cap is currently generating about -0.21 per unit of risk. If you would invest  27,118  in Dodge Cox Stock on December 4, 2024 and sell it today you would earn a total of  180.00  from holding Dodge Cox Stock or generate 0.66% return on investment over 90 days.

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

Dodge Cox Stock  vs.  Deutsche Small Cap

Dodge Cox Stock

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dodge Cox Stock are ranked lower than 1 (%) 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.

Deutsche Small Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Deutsche Small Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Dodge Cox and Deutsche Small

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

The idea behind Dodge Cox Stock and Deutsche Small 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.