Correlation Between Dodge Cox and Federated Equity
Can any of the company-specific risk be diversified away by investing in both Dodge Cox and Federated Equity 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 Federated Equity 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 Federated Equity Income, you can compare the effects of market volatilities on Dodge Cox and Federated Equity 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 Federated Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dodge Cox and Federated Equity.
Diversification Opportunities for Dodge Cox and Federated Equity
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Dodge and FEDERATED is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Dodge Cox Stock and Federated Equity Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Equity Income 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 Federated Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Equity Income has no effect on the direction of Dodge Cox i.e., Dodge Cox and Federated Equity go up and down completely randomly.
Pair Corralation between Dodge Cox and Federated Equity
Assuming the 90 days horizon Dodge Cox Stock is expected to generate 1.02 times more return on investment than Federated Equity. However, Dodge Cox is 1.02 times more volatile than Federated Equity Income. It trades about 0.14 of its potential returns per unit of risk. Federated Equity Income is currently generating about 0.12 per unit of risk. If you would invest 25,399 in Dodge Cox Stock on September 1, 2024 and sell it today you would earn a total of 3,336 from holding Dodge Cox Stock or generate 13.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.21% |
| Values | Daily Returns |
Dodge Cox Stock vs. Federated Equity Income
Performance |
| Timeline |
| Dodge Cox Stock |
| Federated Equity Income |
Dodge Cox and Federated Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dodge Cox and Federated Equity
The main advantage of trading using opposite Dodge Cox and Federated Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dodge Cox position performs unexpectedly, Federated Equity 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 Federated Equity will offset losses from the drop in Federated Equity'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 |
| Federated Equity vs. Fundamental Large Cap | Federated Equity vs. Transamerica Large Cap | Federated Equity vs. Tax Managed Large Cap | Federated Equity 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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