Correlation Between Dodge Cox and Tweedy Browne

Can any of the company-specific risk be diversified away by investing in both Dodge Cox and Tweedy Browne 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 Tweedy Browne into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Dodge Cox Global and Tweedy Browne Worldwide, you can compare the effects of market volatilities on Dodge Cox and Tweedy Browne 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 Tweedy Browne. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dodge Cox and Tweedy Browne.

Diversification Opportunities for Dodge Cox and Tweedy Browne

0.57

Correlation Coefficient

Dodge Cox  Tweedy Browne

Very weak diversification

The 3 months correlation between Dodge and Tweedy is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Dodge Cox Global and Tweedy Browne Worldwide in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tweedy Browne Worldwide 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 Global are associated (or correlated) with Tweedy Browne. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tweedy Browne Worldwide has no effect on the direction of Dodge Cox i.e., Dodge Cox and Tweedy Browne go up and down completely randomly.

Pair Corralation between Dodge Cox and Tweedy Browne

Assuming the 90 days horizon Dodge Cox is expected to generate 1.22 times less return on investment than Tweedy Browne. In addition to that, Dodge Cox is 1.06 times more volatile than Tweedy Browne Worldwide. It trades about 0.19 of its total potential returns per unit of risk. Tweedy Browne Worldwide is currently generating about 0.25 per unit of volatility. If you would invest  537.00  in Tweedy Browne Worldwide on December 20, 2024 and sell it today you would earn a total of  59.00  from holding Tweedy Browne Worldwide or generate 10.99% return on investment over 90 days.

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

Dodge Cox Global  vs.  Tweedy Browne Worldwide

Dodge Cox Global

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dodge Cox Global are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Dodge Cox may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Tweedy Browne Worldwide

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tweedy Browne Worldwide are ranked lower than 19 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Tweedy Browne may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Dodge Cox and Tweedy Browne

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

The idea behind Dodge Cox Global and Tweedy Browne Worldwide 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.