Correlation Between Dodge Cox and Small Cap
Can any of the company-specific risk be diversified away by investing in both Dodge Cox and Small 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 Small 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 Small Cap Value Fund, you can compare the effects of market volatilities on Dodge Cox and Small 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 Small Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dodge Cox and Small Cap.
Diversification Opportunities for Dodge Cox and Small Cap
Very poor diversification
The 3 months correlation between Dodge and Small is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Dodge Cox Stock and Small Cap Value Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small 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 Small Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Cap Value has no effect on the direction of Dodge Cox i.e., Dodge Cox and Small Cap go up and down completely randomly.
Pair Corralation between Dodge Cox and Small Cap
Assuming the 90 days horizon Dodge Cox Stock is expected to generate 0.52 times more return on investment than Small Cap. However, Dodge Cox Stock is 1.92 times less risky than Small Cap. It trades about 0.11 of its potential returns per unit of risk. Small Cap Value Fund is currently generating about 0.04 per unit of risk. If you would invest 20,300 in Dodge Cox Stock on September 19, 2024 and sell it today you would earn a total of 7,331 from holding Dodge Cox Stock or generate 36.11% 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. Small Cap Value Fund
Performance |
| Timeline |
| Dodge Cox Stock |
| Small Cap Value |
Dodge Cox and Small Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dodge Cox and Small Cap
The main advantage of trading using opposite Dodge Cox and Small Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dodge Cox position performs unexpectedly, Small 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 Small Cap will offset losses from the drop in Small Cap's long position.| Dodge Cox vs. Dodge International Stock | Dodge Cox vs. Dodge Balanced Fund | Dodge Cox vs. Dodge Income Fund | Dodge Cox vs. Total Return Fund |
| Small Cap vs. Pace Large Growth | Small Cap vs. Qs Large Cap | Small Cap vs. Morningstar Unconstrained Allocation | Small Cap vs. Dodge Cox Stock |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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