Correlation Between American Mutual and Dodge Cox
Can any of the company-specific risk be diversified away by investing in both American Mutual 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 American Mutual and Dodge Cox into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Mutual Fund and Dodge Cox Stock, you can compare the effects of market volatilities on American Mutual 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 American Mutual with a short position of Dodge Cox. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Mutual and Dodge Cox.
Diversification Opportunities for American Mutual and Dodge Cox
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between American and Dodge is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding American Mutual Fund 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 American Mutual 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 American Mutual 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 Stock has no effect on the direction of American Mutual i.e., American Mutual and Dodge Cox go up and down completely randomly.
Pair Corralation between American Mutual and Dodge Cox
Assuming the 90 days horizon American Mutual Fund is expected to under-perform the Dodge Cox. But the mutual fund apears to be less risky and, when comparing its historical volatility, American Mutual Fund is 1.48 times less risky than Dodge Cox. The mutual fund trades about -0.06 of its potential returns per unit of risk. The Dodge Cox Stock is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 27,634 in Dodge Cox Stock on August 24, 2024 and sell it today you would earn a total of 532.00 from holding Dodge Cox Stock or generate 1.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Mutual Fund vs. Dodge Cox Stock
Performance |
| Timeline |
| American Mutual |
| Dodge Cox Stock |
American Mutual and Dodge Cox Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Mutual and Dodge Cox
The main advantage of trading using opposite American Mutual and Dodge Cox positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Mutual 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.| American Mutual vs. Dreyfusstandish Global Fixed | American Mutual vs. Balanced Fund Retail | American Mutual vs. Touchstone International Equity | American Mutual vs. Ultra Short Term Fixed |
| Dodge Cox vs. Vanguard Value Index | Dodge Cox vs. American Mutual Fund | Dodge Cox vs. American Funds American | Dodge Cox vs. American Funds American |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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