Correlation Between Materials Portfolio and Dodge Cox

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

By analyzing existing cross correlation between Materials Portfolio Fidelity and Dodge Cox International, you can compare the effects of market volatilities on Materials Portfolio and Dodge Cox 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 Materials Portfolio with a short position of Dodge Cox. Check out your portfolio center. Please also check ongoing floating volatility patterns of Materials Portfolio and Dodge Cox.

Diversification Opportunities for Materials Portfolio and Dodge Cox

0.39

Correlation Coefficient

Materials Portfolio  Dodge Cox

Weak diversification

The 3 months correlation between Materials and Dodge is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Materials Portfolio Fidelity and Dodge Cox International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dodge Cox International and Materials Portfolio 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 Materials Portfolio Fidelity are associated (or correlated) with Dodge Cox. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dodge Cox International has no effect on the direction of Materials Portfolio i.e., Materials Portfolio and Dodge Cox go up and down completely randomly.

Pair Corralation between Materials Portfolio and Dodge Cox

Assuming the 90 days horizon Materials Portfolio Fidelity is expected to generate 1.12 times more return on investment than Dodge Cox. However, Materials Portfolio is 1.12 times more volatile than Dodge Cox International. It trades about -0.02 of its potential returns per unit of risk. Dodge Cox International is currently generating about -0.03 per unit of risk. If you would invest  9,779  in Materials Portfolio Fidelity on September 17, 2024 and sell it today you would lose (128.00) from holding Materials Portfolio Fidelity or give up 1.31% of portfolio value over 90 days.

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

Materials Portfolio Fidelity  vs.  Dodge Cox International

Materials Portfolio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Materials Portfolio Fidelity has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Materials Portfolio is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Dodge Cox International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dodge Cox International 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.

Pair Trading with Materials Portfolio and Dodge Cox

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

The idea behind Materials Portfolio Fidelity and Dodge Cox International 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.