Correlation Between Dodge Cox and Hennessy Cornerstone
Can any of the company-specific risk be diversified away by investing in both Dodge Cox and Hennessy Cornerstone 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 Hennessy Cornerstone 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 Hennessy Nerstone Value, you can compare the effects of market volatilities on Dodge Cox and Hennessy Cornerstone 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 Hennessy Cornerstone. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dodge Cox and Hennessy Cornerstone.
Diversification Opportunities for Dodge Cox and Hennessy Cornerstone
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Dodge and Hennessy is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Dodge Stock Fund and Hennessy Nerstone Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hennessy Nerstone Value 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 Stock Fund are associated (or correlated) with Hennessy Cornerstone. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hennessy Nerstone Value has no effect on the direction of Dodge Cox i.e., Dodge Cox and Hennessy Cornerstone go up and down completely randomly.
Pair Corralation between Dodge Cox and Hennessy Cornerstone
Assuming the 90 days horizon Dodge Stock Fund is expected to generate 1.5 times more return on investment than Hennessy Cornerstone. However, Dodge Cox is 1.5 times more volatile than Hennessy Nerstone Value. It trades about 0.18 of its potential returns per unit of risk. Hennessy Nerstone Value is currently generating about 0.18 per unit of risk. If you would invest 27,706 in Dodge Stock Fund on August 28, 2024 and sell it today you would earn a total of 944.00 from holding Dodge Stock Fund or generate 3.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dodge Stock Fund vs. Hennessy Nerstone Value
Performance |
| Timeline |
| Dodge Stock Fund |
| Hennessy Nerstone Value |
Dodge Cox and Hennessy Cornerstone Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dodge Cox and Hennessy Cornerstone
The main advantage of trading using opposite Dodge Cox and Hennessy Cornerstone positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dodge Cox position performs unexpectedly, Hennessy Cornerstone 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 Hennessy Cornerstone will offset losses from the drop in Hennessy Cornerstone's long position.| Dodge Cox vs. Dodge International Stock | Dodge Cox vs. Dodge Balanced Fund | Dodge Cox vs. Dodge Income Fund | Dodge Cox vs. Total Return Fund |
| Hennessy Cornerstone vs. Hennessy Nerstone Growth | Hennessy Cornerstone vs. Hennessy Nerstone Mid | Hennessy Cornerstone vs. Hennessy Large Cap | Hennessy Cornerstone vs. Hennessy Nerstone Large |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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