Correlation Between Dodge Cox and Vanguard Emerging

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Can any of the company-specific risk be diversified away by investing in both Dodge Cox and Vanguard Emerging 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 Vanguard Emerging 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 Vanguard Emerging Markets, you can compare the effects of market volatilities on Dodge Cox and Vanguard Emerging 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 Vanguard Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dodge Cox and Vanguard Emerging.

Diversification Opportunities for Dodge Cox and Vanguard Emerging

0.88
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Dodge and Vanguard is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Dodge Global Stock and Vanguard Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Emerging Markets 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 Vanguard Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Emerging Markets has no effect on the direction of Dodge Cox i.e., Dodge Cox and Vanguard Emerging go up and down completely randomly.

Pair Corralation between Dodge Cox and Vanguard Emerging

Assuming the 90 days horizon Dodge Global Stock is expected to generate 0.76 times more return on investment than Vanguard Emerging. However, Dodge Global Stock is 1.32 times less risky than Vanguard Emerging. It trades about -0.05 of its potential returns per unit of risk. Vanguard Emerging Markets is currently generating about -0.2 per unit of risk. If you would invest  1,662  in Dodge Global Stock on August 30, 2024 and sell it today you would lose (13.00) from holding Dodge Global Stock or give up 0.78% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy95.65%
ValuesDaily Returns

Dodge Global Stock  vs.  Vanguard Emerging Markets

 Performance 
       Timeline  
Dodge Global Stock 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Dodge Global Stock has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Dodge Cox is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Vanguard Emerging Markets 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Weak
Over the last 90 days Vanguard Emerging Markets has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Vanguard Emerging is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Dodge Cox and Vanguard Emerging Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Dodge Cox and Vanguard Emerging

The main advantage of trading using opposite Dodge Cox and Vanguard Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dodge Cox position performs unexpectedly, Vanguard Emerging 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 Vanguard Emerging will offset losses from the drop in Vanguard Emerging's long position.
The idea behind Dodge Global Stock and Vanguard Emerging Markets pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.

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