Correlation Between Dodge Cox and Zacks Dividend

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

Diversification Opportunities for Dodge Cox and Zacks Dividend

0.89

Correlation Coefficient

Dodge Cox  Zacks Dividend

Very poor diversification

The 3 months correlation between Dodge and Zacks is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Dodge Cox Stock and Zacks Dividend Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zacks Dividend 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 Zacks Dividend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zacks Dividend has no effect on the direction of Dodge Cox i.e., Dodge Cox and Zacks Dividend go up and down completely randomly.

Pair Corralation between Dodge Cox and Zacks Dividend

Assuming the 90 days horizon Dodge Cox Stock is expected to generate 1.11 times more return on investment than Zacks Dividend. However, Dodge Cox is 1.11 times more volatile than Zacks Dividend Fund. It trades about 0.16 of its potential returns per unit of risk. Zacks Dividend Fund is currently generating about 0.16 per unit of risk. If you would invest  26,723  in Dodge Cox Stock on September 5, 2024 and sell it today you would earn a total of  1,971  from holding Dodge Cox Stock or generate 7.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

Dodge Cox Stock  vs.  Zacks Dividend Fund

Dodge Cox Stock

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dodge Cox Stock are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Dodge Cox may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Zacks Dividend

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Zacks Dividend Fund are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Zacks Dividend may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Dodge Cox and Zacks Dividend

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

The idea behind Dodge Cox Stock and Zacks Dividend Fund 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.