Correlation Between Science Technology and Dodge Cox

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

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

Diversification Opportunities for Science Technology and Dodge Cox

-0.36

Correlation Coefficient

Science Technology  Dodge Cox

Very good diversification

The 3 months correlation between Science and Dodge is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Science Technology Fund and Dodge Cox Balanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dodge Cox Balanced and Science Technology 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 Science Technology Fund 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 Balanced has no effect on the direction of Science Technology i.e., Science Technology and Dodge Cox go up and down completely randomly.

Pair Corralation between Science Technology and Dodge Cox

Assuming the 90 days horizon Science Technology Fund is expected to under-perform the Dodge Cox. In addition to that, Science Technology is 3.45 times more volatile than Dodge Cox Balanced. It trades about -0.12 of its total potential returns per unit of risk. Dodge Cox Balanced is currently generating about 0.11 per unit of volatility. If you would invest  10,158  in Dodge Cox Balanced on December 29, 2024 and sell it today you would earn a total of  376.00  from holding Dodge Cox Balanced or generate 3.7% return on investment over 90 days.

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

Science Technology Fund  vs.  Dodge Cox Balanced

Science Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days Science Technology Fund 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 fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Dodge Cox Balanced

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dodge Cox Balanced are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental drivers, 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 Science Technology and Dodge Cox

The main advantage of trading using opposite Science Technology and Dodge Cox positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Science Technology 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 Science Technology Fund and Dodge Cox Balanced 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..