Correlation Between Applied Finance and Dodge Cox
Can any of the company-specific risk be diversified away by investing in both Applied Finance 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 Applied Finance and Dodge Cox into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Applied Finance Select and Dodge Cox Stock, you can compare the effects of market volatilities on Applied Finance 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 Applied Finance with a short position of Dodge Cox. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Finance and Dodge Cox.
Diversification Opportunities for Applied Finance and Dodge Cox
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Applied and Dodge is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Applied Finance Select 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 Applied Finance 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 Applied Finance Select 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 Applied Finance i.e., Applied Finance and Dodge Cox go up and down completely randomly.
Pair Corralation between Applied Finance and Dodge Cox
Assuming the 90 days horizon Applied Finance is expected to generate 1.38 times less return on investment than Dodge Cox. In addition to that, Applied Finance is 1.22 times more volatile than Dodge Cox Stock. It trades about 0.09 of its total potential returns per unit of risk. Dodge Cox Stock is currently generating about 0.15 per unit of volatility. If you would invest 22,415 in Dodge Cox Stock on September 2, 2024 and sell it today you would earn a total of 6,390 from holding Dodge Cox Stock or generate 28.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Applied Finance Select vs. Dodge Cox Stock
Performance |
| Timeline |
| Applied Finance Select |
| Dodge Cox Stock |
Applied Finance and Dodge Cox Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Applied Finance and Dodge Cox
The main advantage of trading using opposite Applied Finance and Dodge Cox positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied Finance 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 Applied Finance Select 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.| Dodge Cox vs. Omni Small Cap Value | Dodge Cox vs. T Rowe Price | Dodge Cox vs. Ab Centrated Growth | Dodge Cox vs. Tax Managed Mid Small |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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