Correlation Between Dodge Stock and Absolute Convertible
Can any of the company-specific risk be diversified away by investing in both Dodge Stock and Absolute Convertible 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 Stock and Absolute Convertible into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dodge Stock Fund and Absolute Convertible Arbitrage, you can compare the effects of market volatilities on Dodge Stock and Absolute Convertible 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 Stock with a short position of Absolute Convertible. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dodge Stock and Absolute Convertible.
Diversification Opportunities for Dodge Stock and Absolute Convertible
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Dodge and Absolute is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Dodge Stock Fund and Absolute Convertible Arbitrage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Absolute Convertible and Dodge Stock 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 Stock Fund are associated (or correlated) with Absolute Convertible. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Absolute Convertible has no effect on the direction of Dodge Stock i.e., Dodge Stock and Absolute Convertible go up and down completely randomly.
Pair Corralation between Dodge Stock and Absolute Convertible
Assuming the 90 days horizon Dodge Stock Fund is expected to under-perform the Absolute Convertible. In addition to that, Dodge Stock is 1.43 times more volatile than Absolute Convertible Arbitrage. It trades about -0.23 of its total potential returns per unit of risk. Absolute Convertible Arbitrage is currently generating about -0.13 per unit of volatility. If you would invest 1,146 in Absolute Convertible Arbitrage on September 18, 2024 and sell it today you would lose (9.00) from holding Absolute Convertible Arbitrage or give up 0.79% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dodge Stock Fund vs. Absolute Convertible Arbitrage
Performance |
| Timeline |
| Dodge Stock Fund |
| Absolute Convertible |
Dodge Stock and Absolute Convertible Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dodge Stock and Absolute Convertible
The main advantage of trading using opposite Dodge Stock and Absolute Convertible positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dodge Stock position performs unexpectedly, Absolute Convertible 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 Absolute Convertible will offset losses from the drop in Absolute Convertible's long position.| Dodge Stock vs. Dodge International Stock | Dodge Stock vs. Dodge Balanced Fund | Dodge Stock vs. Dodge Income Fund | Dodge Stock vs. Total Return Fund |
| Absolute Convertible vs. Absolute Capital Opportunities | Absolute Convertible vs. Blackrock Lifepath Dynamic | Absolute Convertible vs. Dodge Stock Fund | Absolute Convertible vs. American Funds 2040 |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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