Correlation Between Dodge Cox and International Equity
Can any of the company-specific risk be diversified away by investing in both Dodge Cox and International Equity 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 International Equity 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 International Equity Series, you can compare the effects of market volatilities on Dodge Cox and International Equity 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 International Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dodge Cox and International Equity.
Diversification Opportunities for Dodge Cox and International Equity
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Dodge and International is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Dodge International Stock and International Equity Series in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Equity 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 International Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Equity has no effect on the direction of Dodge Cox i.e., Dodge Cox and International Equity go up and down completely randomly.
Pair Corralation between Dodge Cox and International Equity
Assuming the 90 days horizon Dodge Cox is expected to generate 1.32 times less return on investment than International Equity. In addition to that, Dodge Cox is 1.04 times more volatile than International Equity Series. It trades about 0.13 of its total potential returns per unit of risk. International Equity Series is currently generating about 0.18 per unit of volatility. If you would invest 1,022 in International Equity Series on October 22, 2024 and sell it today you would earn a total of 22.00 from holding International Equity Series or generate 2.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dodge International Stock vs. International Equity Series
Performance |
| Timeline |
| Dodge International Stock |
| International Equity |
Dodge Cox and International Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dodge Cox and International Equity
The main advantage of trading using opposite Dodge Cox and International Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dodge Cox position performs unexpectedly, International Equity 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 International Equity will offset losses from the drop in International Equity'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 |
| International Equity vs. Franklin Small Mid Cap | International Equity vs. Blackrock Glbl Sm | International Equity vs. Blackrock Fundamental Growth | International Equity vs. Blackrock Gbl Alloc |
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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