Correlation Between Dodge Cox and Tweedy Browne
Can any of the company-specific risk be diversified away by investing in both Dodge Cox and Tweedy Browne 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 Tweedy Browne 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 Tweedy Browne Value, you can compare the effects of market volatilities on Dodge Cox and Tweedy Browne 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 Tweedy Browne. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dodge Cox and Tweedy Browne.
Diversification Opportunities for Dodge Cox and Tweedy Browne
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Dodge and Tweedy is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Dodge Global Stock and Tweedy Browne Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tweedy Browne 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 Global Stock are associated (or correlated) with Tweedy Browne. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tweedy Browne Value has no effect on the direction of Dodge Cox i.e., Dodge Cox and Tweedy Browne go up and down completely randomly.
Pair Corralation between Dodge Cox and Tweedy Browne
Assuming the 90 days horizon Dodge Global Stock is expected to generate 1.13 times more return on investment than Tweedy Browne. However, Dodge Cox is 1.13 times more volatile than Tweedy Browne Value. It trades about 0.09 of its potential returns per unit of risk. Tweedy Browne Value is currently generating about 0.06 per unit of risk. If you would invest 1,429 in Dodge Global Stock on September 3, 2024 and sell it today you would earn a total of 223.00 from holding Dodge Global Stock or generate 15.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dodge Global Stock vs. Tweedy Browne Value
Performance |
| Timeline |
| Dodge Global Stock |
| Tweedy Browne Value |
Dodge Cox and Tweedy Browne Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dodge Cox and Tweedy Browne
The main advantage of trading using opposite Dodge Cox and Tweedy Browne positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dodge Cox position performs unexpectedly, Tweedy Browne 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 Tweedy Browne will offset losses from the drop in Tweedy Browne's long position.| Dodge Cox vs. Lord Abbett High | Dodge Cox vs. Virtus High Yield | Dodge Cox vs. Blackrock High Yield | Dodge Cox vs. Prudential High Yield |
| Tweedy Browne vs. Dodge Global Stock | Tweedy Browne vs. T Rowe Price | Tweedy Browne vs. Franklin Mutual Global | Tweedy Browne vs. Franklin Mutual Global |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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