Correlation Between Absolute Convertible and Dodge Cox
Can any of the company-specific risk be diversified away by investing in both Absolute Convertible 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 Absolute Convertible and Dodge Cox into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Absolute Convertible Arbitrage and Dodge Cox Global, you can compare the effects of market volatilities on Absolute Convertible 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 Absolute Convertible with a short position of Dodge Cox. Check out your portfolio center. Please also check ongoing floating volatility patterns of Absolute Convertible and Dodge Cox.
Diversification Opportunities for Absolute Convertible and Dodge Cox
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Absolute and Dodge is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Absolute Convertible Arbitrage and Dodge Cox Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dodge Cox Global and Absolute Convertible 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 Absolute Convertible Arbitrage 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 Global has no effect on the direction of Absolute Convertible i.e., Absolute Convertible and Dodge Cox go up and down completely randomly.
Pair Corralation between Absolute Convertible and Dodge Cox
Assuming the 90 days horizon Absolute Convertible is expected to generate 2.01 times less return on investment than Dodge Cox. But when comparing it to its historical volatility, Absolute Convertible Arbitrage is 12.74 times less risky than Dodge Cox. It trades about 0.56 of its potential returns per unit of risk. Dodge Cox Global is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 1,421 in Dodge Cox Global on September 2, 2024 and sell it today you would earn a total of 233.00 from holding Dodge Cox Global or generate 16.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Absolute Convertible Arbitrage vs. Dodge Cox Global
Performance |
| Timeline |
| Absolute Convertible |
| Dodge Cox Global |
Absolute Convertible and Dodge Cox Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Absolute Convertible and Dodge Cox
The main advantage of trading using opposite Absolute Convertible and Dodge Cox positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Absolute Convertible 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.| Absolute Convertible vs. Angel Oak Multi Strategy | Absolute Convertible vs. Transamerica Emerging Markets | Absolute Convertible vs. Black Oak Emerging | Absolute Convertible vs. Barings Emerging Markets |
| Dodge Cox vs. Thrivent Income Fund | Dodge Cox vs. Touchstone Premium Yield | Dodge Cox vs. Federated Ultrashort Bond | Dodge Cox vs. Ambrus Core Bond |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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