Correlation Between Capital Income and Dodge Cox
Can any of the company-specific risk be diversified away by investing in both Capital Income 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 Capital Income and Dodge Cox into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Capital Income Builder and Dodge Global Stock, you can compare the effects of market volatilities on Capital Income 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 Capital Income with a short position of Dodge Cox. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital Income and Dodge Cox.
Diversification Opportunities for Capital Income and Dodge Cox
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Capital and Dodge is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Capital Income Builder and Dodge Global Stock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dodge Global Stock and Capital Income 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 Capital Income Builder 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 Global Stock has no effect on the direction of Capital Income i.e., Capital Income and Dodge Cox go up and down completely randomly.
Pair Corralation between Capital Income and Dodge Cox
Assuming the 90 days horizon Capital Income Builder is expected to generate 0.63 times more return on investment than Dodge Cox. However, Capital Income Builder is 1.58 times less risky than Dodge Cox. It trades about 0.28 of its potential returns per unit of risk. Dodge Global Stock is currently generating about 0.08 per unit of risk. If you would invest 7,082 in Capital Income Builder on November 27, 2024 and sell it today you would earn a total of 163.00 from holding Capital Income Builder or generate 2.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Capital Income Builder vs. Dodge Global Stock
Performance |
| Timeline |
| Capital Income Builder |
| Dodge Global Stock |
Capital Income and Dodge Cox Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Capital Income and Dodge Cox
The main advantage of trading using opposite Capital Income and Dodge Cox positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital Income 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.| Capital Income vs. Goldman Sachs Small | Capital Income vs. Ashmore Emerging Markets | Capital Income vs. Transamerica International Small | Capital Income vs. Franklin Small Cap |
| Dodge Cox vs. Vanguard Financials Index | Dodge Cox vs. John Hancock Financial | Dodge Cox vs. Davis Financial Fund | Dodge Cox vs. Putnam Global Financials |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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