Correlation Between Dodge Cox and Mfs International
Can any of the company-specific risk be diversified away by investing in both Dodge Cox and Mfs International 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 Dodge Cox and Mfs International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dodge International Stock and Mfs International Large, you can compare the effects of market volatilities on Dodge Cox and Mfs International 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 Dodge Cox with a short position of Mfs International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dodge Cox and Mfs International.
Diversification Opportunities for Dodge Cox and Mfs International
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Dodge and Mfs is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Dodge International Stock and Mfs International Large in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mfs International Large and Dodge Cox 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 Dodge International Stock are associated (or correlated) with Mfs International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mfs International Large has no effect on the direction of Dodge Cox i.e., Dodge Cox and Mfs International go up and down completely randomly.
Pair Corralation between Dodge Cox and Mfs International
Assuming the 90 days horizon Dodge International Stock is expected to under-perform the Mfs International. In addition to that, Dodge Cox is 1.03 times more volatile than Mfs International Large. It trades about -0.23 of its total potential returns per unit of risk. Mfs International Large is currently generating about -0.2 per unit of volatility. If you would invest 1,503 in Mfs International Large on August 28, 2024 and sell it today you would lose (87.00) from holding Mfs International Large or give up 5.79% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dodge International Stock vs. Mfs International Large
Performance |
| Timeline |
| Dodge International Stock |
| Mfs International Large |
Dodge Cox and Mfs International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dodge Cox and Mfs International
The main advantage of trading using opposite Dodge Cox and Mfs International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dodge Cox position performs unexpectedly, Mfs International 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 Mfs International will offset losses from the drop in Mfs International's long position.| Dodge Cox vs. Dodge Stock Fund | Dodge Cox vs. Dodge Income Fund | Dodge Cox vs. Dodge Balanced Fund | Dodge Cox vs. The Fairholme Fund |
| Mfs International vs. Mfs Prudent Investor | Mfs International vs. Mfs Prudent Investor | Mfs International vs. Mfs Prudent Investor | Mfs International vs. Mfs Prudent Investor |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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