Correlation Between Dodge Cox and Multimanager Lifestyle
Can any of the company-specific risk be diversified away by investing in both Dodge Cox and Multimanager Lifestyle 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 Multimanager Lifestyle 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 Multimanager Lifestyle Aggressive, you can compare the effects of market volatilities on Dodge Cox and Multimanager Lifestyle 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 Multimanager Lifestyle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dodge Cox and Multimanager Lifestyle.
Diversification Opportunities for Dodge Cox and Multimanager Lifestyle
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Dodge and Multimanager is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Dodge Cox Stock and Multimanager Lifestyle Aggress in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Multimanager Lifestyle 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 Multimanager Lifestyle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Multimanager Lifestyle has no effect on the direction of Dodge Cox i.e., Dodge Cox and Multimanager Lifestyle go up and down completely randomly.
Pair Corralation between Dodge Cox and Multimanager Lifestyle
Assuming the 90 days horizon Dodge Cox Stock is expected to under-perform the Multimanager Lifestyle. But the mutual fund apears to be less risky and, when comparing its historical volatility, Dodge Cox Stock is 1.02 times less risky than Multimanager Lifestyle. The mutual fund trades about -0.17 of its potential returns per unit of risk. The Multimanager Lifestyle Aggressive is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 1,518 in Multimanager Lifestyle Aggressive on September 13, 2024 and sell it today you would earn a total of 13.00 from holding Multimanager Lifestyle Aggressive or generate 0.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Dodge Cox Stock vs. Multimanager Lifestyle Aggress
Performance |
| Timeline |
| Dodge Cox Stock |
| Multimanager Lifestyle |
Dodge Cox and Multimanager Lifestyle Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dodge Cox and Multimanager Lifestyle
The main advantage of trading using opposite Dodge Cox and Multimanager Lifestyle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dodge Cox position performs unexpectedly, Multimanager Lifestyle 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 Multimanager Lifestyle will offset losses from the drop in Multimanager Lifestyle's long position.| Dodge Cox vs. Morningstar Unconstrained Allocation | Dodge Cox vs. Aqr Large Cap | Dodge Cox vs. Fisher Large Cap |
| Multimanager Lifestyle vs. Dodge Cox Stock | Multimanager Lifestyle vs. Avantis Large Cap | Multimanager Lifestyle vs. Qs Large Cap | Multimanager Lifestyle vs. Dana Large Cap |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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