Correlation Between Dodge Cox and SPACE
Can any of the company-specific risk be diversified away by investing in both Dodge Cox and SPACE 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 SPACE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dodge Global Stock and SPACE, you can compare the effects of market volatilities on Dodge Cox and SPACE 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 SPACE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dodge Cox and SPACE.
Diversification Opportunities for Dodge Cox and SPACE
Very weak diversification
The 3 months correlation between Dodge and SPACE is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Dodge Global Stock and SPACE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPACE 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 Stock are associated (or correlated) with SPACE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPACE has no effect on the direction of Dodge Cox i.e., Dodge Cox and SPACE go up and down completely randomly.
Pair Corralation between Dodge Cox and SPACE
Assuming the 90 days horizon Dodge Cox is expected to generate 15.25 times less return on investment than SPACE. But when comparing it to its historical volatility, Dodge Global Stock is 10.64 times less risky than SPACE. It trades about 0.03 of its potential returns per unit of risk. SPACE is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 17.00 in SPACE on November 27, 2024 and sell it today you would earn a total of 10.00 from holding SPACE or generate 58.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 96.12% |
| Values | Daily Returns |
Dodge Global Stock vs. SPACE
Performance |
| Timeline |
| Dodge Global Stock |
| SPACE |
Dodge Cox and SPACE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dodge Cox and SPACE
The main advantage of trading using opposite Dodge Cox and SPACE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dodge Cox position performs unexpectedly, SPACE 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 SPACE will offset losses from the drop in SPACE's long position.| Dodge Cox vs. Vanguard Financials Index | Dodge Cox vs. John Hancock Financial | Dodge Cox vs. Davis Financial Fund | Dodge Cox vs. Putnam Global Financials |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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