Correlation Between Dodge Cox and Wisdomtree Digital

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

Diversification Opportunities for Dodge Cox and Wisdomtree Digital

0.56

Correlation Coefficient

Dodge Cox  Wisdomtree Digital

Very weak diversification

The 3 months correlation between Dodge and Wisdomtree is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Dodge Cox Stock and Wisdomtree Digital Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wisdomtree Digital Trust 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 Wisdomtree Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wisdomtree Digital Trust has no effect on the direction of Dodge Cox i.e., Dodge Cox and Wisdomtree Digital go up and down completely randomly.

Pair Corralation between Dodge Cox and Wisdomtree Digital

Assuming the 90 days horizon Dodge Cox Stock is expected to under-perform the Wisdomtree Digital. In addition to that, Dodge Cox is 2.42 times more volatile than Wisdomtree Digital Trust. It trades about -0.18 of its total potential returns per unit of risk. Wisdomtree Digital Trust is currently generating about -0.28 per unit of volatility. If you would invest  1,028  in Wisdomtree Digital Trust on October 11, 2024 and sell it today you would lose (19.00) from holding Wisdomtree Digital Trust or give up 1.85% of portfolio value over 90 days.

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

Dodge Cox Stock  vs.  Wisdomtree Digital Trust

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.

Wisdomtree Digital Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wisdomtree Digital Trust has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Wisdomtree Digital 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 Wisdomtree Digital

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

The idea behind Dodge Cox Stock and Wisdomtree Digital Trust 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.