Correlation Between Value Fund and Dodge Cox

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

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

Diversification Opportunities for Value Fund and Dodge Cox

0.53

Correlation Coefficient

Value Fund  Dodge Cox

Very weak diversification

The 3 months correlation between Value and Dodge is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Value Fund Investor 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 Value Fund 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 Value Fund Investor 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 Value Fund i.e., Value Fund and Dodge Cox go up and down completely randomly.

Pair Corralation between Value Fund and Dodge Cox

Assuming the 90 days horizon Value Fund Investor is expected to under-perform the Dodge Cox. In addition to that, Value Fund is 1.8 times more volatile than Dodge Cox Stock. It trades about -0.12 of its total potential returns per unit of risk. Dodge Cox Stock is currently generating about -0.01 per unit of volatility. If you would invest  27,455  in Dodge Cox Stock on November 28, 2024 and sell it today you would lose (188.00) from holding Dodge Cox Stock or give up 0.68% of portfolio value over 90 days.

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

Value Fund Investor  vs.  Dodge Cox Stock

Value Fund Investor

Risk-Adjusted Performance

Very Weak

Over the last 90 days Value Fund Investor has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's essential 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

Very Weak

Over the last 90 days Dodge Cox Stock 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 Value Fund and Dodge Cox

The main advantage of trading using opposite Value Fund and Dodge Cox positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Value Fund 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 Value Fund Investor 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.