Correlation Between Dodge Cox and Capital World
Can any of the company-specific risk be diversified away by investing in both Dodge Cox and Capital World 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 Capital World 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 Capital World Bond, you can compare the effects of market volatilities on Dodge Cox and Capital World 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 Capital World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dodge Cox and Capital World.
Diversification Opportunities for Dodge Cox and Capital World
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Dodge and Capital is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Dodge Global Bond and Capital World Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital World Bond 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 Capital World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital World Bond has no effect on the direction of Dodge Cox i.e., Dodge Cox and Capital World go up and down completely randomly.
Pair Corralation between Dodge Cox and Capital World
Assuming the 90 days horizon Dodge Global Bond is expected to generate 0.87 times more return on investment than Capital World. However, Dodge Global Bond is 1.15 times less risky than Capital World. It trades about 0.1 of its potential returns per unit of risk. Capital World Bond is currently generating about 0.02 per unit of risk. If you would invest 1,089 in Dodge Global Bond on September 1, 2024 and sell it today you would earn a total of 9.00 from holding Dodge Global Bond or generate 0.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dodge Global Bond vs. Capital World Bond
Performance |
| Timeline |
| Dodge Global Bond |
| Capital World Bond |
Dodge Cox and Capital World Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dodge Cox and Capital World
The main advantage of trading using opposite Dodge Cox and Capital World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dodge Cox position performs unexpectedly, Capital World 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 Capital World will offset losses from the drop in Capital World's 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 |
| Capital World vs. Gmo Resources | Capital World vs. Dreyfus Natural Resources | Capital World vs. Franklin Natural Resources | Capital World vs. Oil Gas Ultrasector |
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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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