Correlation Between Dodge Cox and American Mutual
Can any of the company-specific risk be diversified away by investing in both Dodge Cox and American Mutual 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 American Mutual into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dodge Cox Stock and American Mutual Fund, you can compare the effects of market volatilities on Dodge Cox and American Mutual 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 American Mutual. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dodge Cox and American Mutual.
Diversification Opportunities for Dodge Cox and American Mutual
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Dodge and American is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Dodge Cox Stock and American Mutual Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Mutual 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 Stock are associated (or correlated) with American Mutual. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Mutual has no effect on the direction of Dodge Cox i.e., Dodge Cox and American Mutual go up and down completely randomly.
Pair Corralation between Dodge Cox and American Mutual
Assuming the 90 days horizon Dodge Cox Stock is expected to generate 1.24 times more return on investment than American Mutual. However, Dodge Cox is 1.24 times more volatile than American Mutual Fund. It trades about 0.12 of its potential returns per unit of risk. American Mutual Fund is currently generating about 0.12 per unit of risk. If you would invest 21,487 in Dodge Cox Stock on August 28, 2024 and sell it today you would earn a total of 7,040 from holding Dodge Cox Stock or generate 32.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.72% |
| Values | Daily Returns |
Dodge Cox Stock vs. American Mutual Fund
Performance |
| Timeline |
| Dodge Cox Stock |
| American Mutual |
Dodge Cox and American Mutual Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dodge Cox and American Mutual
The main advantage of trading using opposite Dodge Cox and American Mutual positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dodge Cox position performs unexpectedly, American Mutual 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 American Mutual will offset losses from the drop in American Mutual's long position.| Dodge Cox vs. Aqr Large Cap | Dodge Cox vs. Fisher Large Cap | Dodge Cox vs. Wasatch Large Cap | Dodge Cox vs. Knights Of Umbus |
| American Mutual vs. Dws Government Money | American Mutual vs. Nuveen All American Municipal | American Mutual vs. Oklahoma Municipal Fund | American Mutual vs. Vanguard Short Term Government |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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