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 Cox International and Tweedy Browne Global, 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
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dodge and Tweedy is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Dodge Cox International and Tweedy Browne Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tweedy Browne Global 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 Cox International 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 Global 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 Cox International is expected to generate 1.26 times more return on investment than Tweedy Browne. However, Dodge Cox is 1.26 times more volatile than Tweedy Browne Global. It trades about 0.06 of its potential returns per unit of risk. Tweedy Browne Global is currently generating about 0.04 per unit of risk. If you would invest 4,283 in Dodge Cox International on September 3, 2024 and sell it today you would earn a total of 1,004 from holding Dodge Cox International or generate 23.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dodge Cox International vs. Tweedy Browne Global
Performance |
| Timeline |
| Dodge Cox International |
| Tweedy Browne Global |
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. Wells Fargo Funds | Dodge Cox vs. General Money Market | Dodge Cox vs. Prudential Government Money | Dodge Cox vs. John Hancock Money |
| Tweedy Browne vs. Tweedy Browne Worldwide | Tweedy Browne vs. Tweedy Browne Value | Tweedy Browne vs. Tweedy Browne Global | Tweedy Browne vs. Longleaf Partners International |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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