Correlation Between American Balanced and Dodge Cox
Can any of the company-specific risk be diversified away by investing in both American Balanced 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 Balanced 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 Balanced Fund and Dodge Cox Balanced, you can compare the effects of market volatilities on American Balanced 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 Balanced with a short position of Dodge Cox. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Balanced and Dodge Cox.
Diversification Opportunities for American Balanced and Dodge Cox
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between AMERICAN and Dodge is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding American Balanced 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 American Balanced 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 Balanced 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 American Balanced i.e., American Balanced and Dodge Cox go up and down completely randomly.
Pair Corralation between American Balanced and Dodge Cox
Assuming the 90 days horizon American Balanced Fund is expected to generate 1.19 times more return on investment than Dodge Cox. However, American Balanced is 1.19 times more volatile than Dodge Cox Balanced. It trades about 0.12 of its potential returns per unit of risk. Dodge Cox Balanced is currently generating about 0.1 per unit of risk. If you would invest 3,594 in American Balanced Fund on August 27, 2024 and sell it today you would earn a total of 49.00 from holding American Balanced Fund or generate 1.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Balanced Fund vs. Dodge Cox Balanced
Performance |
| Timeline |
| American Balanced |
| Dodge Cox Balanced |
American Balanced and Dodge Cox Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Balanced and Dodge Cox
The main advantage of trading using opposite American Balanced and Dodge Cox positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Balanced 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 Balanced vs. Income Fund Of | American Balanced vs. Capital Income Builder | American Balanced vs. Capital World Growth | American Balanced vs. Growth Fund Of |
| Dodge Cox vs. Dodge Stock Fund | Dodge Cox vs. Dodge International Stock | Dodge Cox vs. Dodge Cox Emerging | Dodge Cox vs. Dodge Global Stock |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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