Correlation Between Dodge Cox and Mid Cap
Can any of the company-specific risk be diversified away by investing in both Dodge Cox and Mid Cap 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 Mid Cap 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 Mid Cap Value, you can compare the effects of market volatilities on Dodge Cox and Mid Cap 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 Mid Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dodge Cox and Mid Cap.
Diversification Opportunities for Dodge Cox and Mid Cap
Very poor diversification
The 3 months correlation between Dodge and Mid is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Dodge Cox Stock and Mid Cap Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mid Cap 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 Cox Stock are associated (or correlated) with Mid Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mid Cap Value has no effect on the direction of Dodge Cox i.e., Dodge Cox and Mid Cap go up and down completely randomly.
Pair Corralation between Dodge Cox and Mid Cap
Assuming the 90 days horizon Dodge Cox Stock is expected to generate 1.02 times more return on investment than Mid Cap. However, Dodge Cox is 1.02 times more volatile than Mid Cap Value. It trades about 0.09 of its potential returns per unit of risk. Mid Cap Value is currently generating about 0.04 per unit of risk. If you would invest 21,299 in Dodge Cox Stock on September 1, 2024 and sell it today you would earn a total of 7,436 from holding Dodge Cox Stock or generate 34.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dodge Cox Stock vs. Mid Cap Value
Performance |
| Timeline |
| Dodge Cox Stock |
| Mid Cap Value |
Dodge Cox and Mid Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dodge Cox and Mid Cap
The main advantage of trading using opposite Dodge Cox and Mid Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dodge Cox position performs unexpectedly, Mid Cap 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 Mid Cap will offset losses from the drop in Mid Cap's long position.| Dodge Cox vs. Dodge Stock Fund | Dodge Cox vs. Dodge International Stock | Dodge Cox vs. Dodge Cox Emerging | Dodge Cox vs. Dodge Balanced Fund |
| Mid Cap vs. American Funds Conservative | Mid Cap vs. Huber Capital Diversified | Mid Cap vs. Aqr Diversified Arbitrage | Mid Cap vs. Blackrock Conservative Prprdptfinstttnl |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
Other Complementary Tools
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated | |
| Analyst Advice Analyst recommendations and target price estimates broken down by several categories | |
| Insider Screener Find insiders across different sectors to evaluate their impact on performance | |
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk | |
| Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios |