Correlation Between Dodge Cox and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Dodge Cox and Dow Jones 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 Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dodge Global Bond and Dow Jones Industrial, you can compare the effects of market volatilities on Dodge Cox and Dow Jones 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 Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dodge Cox and Dow Jones.
Diversification Opportunities for Dodge Cox and Dow Jones
Excellent diversification
The 3 months correlation between Dodge and Dow is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Dodge Global Bond and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial 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 Global Bond are associated (or correlated) with Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of Dodge Cox i.e., Dodge Cox and Dow Jones go up and down completely randomly.
Pair Corralation between Dodge Cox and Dow Jones
Assuming the 90 days horizon Dodge Cox is expected to generate 1.99 times less return on investment than Dow Jones. But when comparing it to its historical volatility, Dodge Global Bond is 2.07 times less risky than Dow Jones. It trades about 0.08 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 3,394,710 in Dow Jones Industrial on August 26, 2024 and sell it today you would earn a total of 1,034,941 from holding Dow Jones Industrial or generate 30.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dodge Global Bond vs. Dow Jones Industrial
Performance |
| Timeline |
Dodge Cox and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Dodge Global Bond
Pair trading matchups for Dodge Cox
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Dodge Cox and Dow Jones
The main advantage of trading using opposite Dodge Cox and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dodge Cox position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| Dodge Cox vs. Dodge Global Stock | Dodge Cox vs. Dodge Cox Emerging | Dodge Cox vs. Dodge Income Fund | Dodge Cox vs. Hotchkis Wiley High |
| Dow Jones vs. Vistra Energy Corp | Dow Jones vs. Fluence Energy | Dow Jones vs. Old Republic International | Dow Jones vs. Empresa Distribuidora y |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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