Correlation Between International Equity and Dodge Cox

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

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

Diversification Opportunities for International Equity and Dodge Cox

0.89

Correlation Coefficient

International Equity  Dodge Cox

Very poor diversification

The 3 months correlation between International and Dodge is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding International Equity Series 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 International Equity 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 International Equity Series 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 International Equity i.e., International Equity and Dodge Cox go up and down completely randomly.

Pair Corralation between International Equity and Dodge Cox

Assuming the 90 days horizon International Equity Series is expected to under-perform the Dodge Cox. In addition to that, International Equity is 2.74 times more volatile than Dodge Cox International. It trades about -0.3 of its total potential returns per unit of risk. Dodge Cox International is currently generating about -0.37 per unit of volatility. If you would invest  5,382  in Dodge Cox International on October 8, 2024 and sell it today you would lose (397.00) from holding Dodge Cox International or give up 7.38% of portfolio value over 90 days.

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

International Equity Series  vs.  Dodge Cox International

International Equity

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days International Equity Series has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund 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 latest weak performance, the Fund's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with International Equity and Dodge Cox

The main advantage of trading using opposite International Equity and Dodge Cox positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Equity 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 International Equity Series 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.

Check out your portfolio center.

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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.