Correlation Between Fundamental Large and Dodge Cox

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

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

Diversification Opportunities for Fundamental Large and Dodge Cox

0.31

Correlation Coefficient

Fundamental Large  Dodge Cox

Weak diversification

The 3 months correlation between Fundamental and Dodge is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Fundamental Large Cap and Dodge Cox Stock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dodge Cox Stock and Fundamental Large 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 Fundamental Large Cap 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 Stock has no effect on the direction of Fundamental Large i.e., Fundamental Large and Dodge Cox go up and down completely randomly.

Pair Corralation between Fundamental Large and Dodge Cox

Assuming the 90 days horizon Fundamental Large Cap is expected to under-perform the Dodge Cox. In addition to that, Fundamental Large is 2.11 times more volatile than Dodge Cox Stock. It trades about -0.1 of its total potential returns per unit of risk. Dodge Cox Stock is currently generating about 0.06 per unit of volatility. If you would invest  26,846  in Dodge Cox Stock on November 20, 2024 and sell it today you would earn a total of  618.00  from holding Dodge Cox Stock or generate 2.3% return on investment over 90 days.

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

Fundamental Large Cap  vs.  Dodge Cox Stock

Fundamental Large Cap

Risk-Adjusted Performance

Very Weak

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

Dodge Cox Stock

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Dodge Cox Stock are ranked lower than 4 (%) 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.

Pair Trading with Fundamental Large and Dodge Cox

The main advantage of trading using opposite Fundamental Large and Dodge Cox positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fundamental Large 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 Fundamental Large Cap and Dodge Cox Stock 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.