Correlation Between Dodge Cox and New Perspective
Can any of the company-specific risk be diversified away by investing in both Dodge Cox and New Perspective 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 New Perspective 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 New Perspective Fund, you can compare the effects of market volatilities on Dodge Cox and New Perspective 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 New Perspective. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dodge Cox and New Perspective.
Diversification Opportunities for Dodge Cox and New Perspective
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dodge and New is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Dodge Cox Stock and New Perspective Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Perspective 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 New Perspective. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Perspective has no effect on the direction of Dodge Cox i.e., Dodge Cox and New Perspective go up and down completely randomly.
Pair Corralation between Dodge Cox and New Perspective
Assuming the 90 days horizon Dodge Cox Stock is expected to generate 1.4 times more return on investment than New Perspective. However, Dodge Cox is 1.4 times more volatile than New Perspective Fund. It trades about 0.28 of its potential returns per unit of risk. New Perspective Fund is currently generating about 0.23 per unit of risk. If you would invest 27,361 in Dodge Cox Stock on September 1, 2024 and sell it today you would earn a total of 1,444 from holding Dodge Cox Stock or generate 5.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Dodge Cox Stock vs. New Perspective Fund
Performance |
| Timeline |
| Dodge Cox Stock |
| New Perspective |
Dodge Cox and New Perspective Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dodge Cox and New Perspective
The main advantage of trading using opposite Dodge Cox and New Perspective positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dodge Cox position performs unexpectedly, New Perspective 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 New Perspective will offset losses from the drop in New Perspective'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 |
| New Perspective vs. Fidelity Advisor 529 | New Perspective vs. Cref Inflation Linked Bond | New Perspective vs. Aqr Managed Futures | New Perspective vs. American Funds Inflation |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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