Correlation Between Dodge Cox and Prudential Government
Can any of the company-specific risk be diversified away by investing in both Dodge Cox and Prudential Government 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 Prudential Government 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 Prudential Government Income, you can compare the effects of market volatilities on Dodge Cox and Prudential Government 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 Prudential Government. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dodge Cox and Prudential Government.
Diversification Opportunities for Dodge Cox and Prudential Government
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dodge and Prudential is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Dodge Cox Stock and Prudential Government Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Government 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 Prudential Government. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential Government has no effect on the direction of Dodge Cox i.e., Dodge Cox and Prudential Government go up and down completely randomly.
Pair Corralation between Dodge Cox and Prudential Government
Assuming the 90 days horizon Dodge Cox Stock is expected to generate 2.12 times more return on investment than Prudential Government. However, Dodge Cox is 2.12 times more volatile than Prudential Government Income. It trades about 0.33 of its potential returns per unit of risk. Prudential Government Income is currently generating about 0.1 per unit of risk. If you would invest 25,973 in Dodge Cox Stock on November 6, 2024 and sell it today you would earn a total of 1,145 from holding Dodge Cox Stock or generate 4.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dodge Cox Stock vs. Prudential Government Income
Performance |
| Timeline |
| Dodge Cox Stock |
| Prudential Government |
Dodge Cox and Prudential Government Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dodge Cox and Prudential Government
The main advantage of trading using opposite Dodge Cox and Prudential Government positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dodge Cox position performs unexpectedly, Prudential Government 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 Prudential Government will offset losses from the drop in Prudential Government's long position.| Dodge Cox vs. American Mutual Fund | Dodge Cox vs. Aqr Large Cap | Dodge Cox vs. Tax Managed Large Cap | Dodge Cox vs. Blackrock Large Cap |
| Prudential Government vs. Ab Bond Inflation | Prudential Government vs. Rbc Bluebay Emerging | Prudential Government vs. Barings High Yield | Prudential Government vs. Pace Municipal Fixed |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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