Correlation Between Small Cap and Dodge Cox
Can any of the company-specific risk be diversified away by investing in both Small Cap 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 Small Cap and Dodge Cox into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Small Cap Stock and Dodge Cox Stock, you can compare the effects of market volatilities on Small Cap 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 Small Cap with a short position of Dodge Cox. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Dodge Cox.
Diversification Opportunities for Small Cap and Dodge Cox
Almost no diversification
The 3 months correlation between Small and Dodge is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Stock 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 Small Cap 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 Small Cap Stock 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 Small Cap i.e., Small Cap and Dodge Cox go up and down completely randomly.
Pair Corralation between Small Cap and Dodge Cox
Assuming the 90 days horizon Small Cap Stock is expected to under-perform the Dodge Cox. In addition to that, Small Cap is 1.92 times more volatile than Dodge Cox Stock. It trades about -0.44 of its total potential returns per unit of risk. Dodge Cox Stock is currently generating about -0.18 per unit of volatility. If you would invest 26,737 in Dodge Cox Stock on October 12, 2024 and sell it today you would lose (774.00) from holding Dodge Cox Stock or give up 2.89% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Small Cap Stock vs. Dodge Cox Stock
Performance |
Timeline |
Small Cap Stock |
Dodge Cox Stock |
Small Cap and Dodge Cox Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Small Cap and Dodge Cox
The main advantage of trading using opposite Small Cap and Dodge Cox positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap 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.Small Cap vs. Technology Ultrasector Profund | Small Cap vs. Invesco Technology Fund | Small Cap vs. Mfs Technology Fund | Small Cap vs. Towpath Technology |
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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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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