Correlation Between Dodge Cox and Prudential Jennison
Can any of the company-specific risk be diversified away by investing in both Dodge Cox and Prudential Jennison 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 Jennison 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 Jennison Equity, you can compare the effects of market volatilities on Dodge Cox and Prudential Jennison 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 Jennison. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dodge Cox and Prudential Jennison.
Diversification Opportunities for Dodge Cox and Prudential Jennison
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Dodge and Prudential is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Dodge Cox Stock and Prudential Jennison Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Jennison 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 Jennison. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential Jennison has no effect on the direction of Dodge Cox i.e., Dodge Cox and Prudential Jennison go up and down completely randomly.
Pair Corralation between Dodge Cox and Prudential Jennison
Assuming the 90 days horizon Dodge Cox Stock is expected to under-perform the Prudential Jennison. But the mutual fund apears to be less risky and, when comparing its historical volatility, Dodge Cox Stock is 1.21 times less risky than Prudential Jennison. The mutual fund trades about -0.17 of its potential returns per unit of risk. The Prudential Jennison Equity is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest 2,409 in Prudential Jennison Equity on September 13, 2024 and sell it today you would lose (16.00) from holding Prudential Jennison Equity or give up 0.66% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dodge Cox Stock vs. Prudential Jennison Equity
Performance |
| Timeline |
| Dodge Cox Stock |
| Prudential Jennison |
Dodge Cox and Prudential Jennison Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dodge Cox and Prudential Jennison
The main advantage of trading using opposite Dodge Cox and Prudential Jennison positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dodge Cox position performs unexpectedly, Prudential Jennison 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 Jennison will offset losses from the drop in Prudential Jennison's long position.| Dodge Cox vs. Morningstar Unconstrained Allocation | Dodge Cox vs. Aqr Large Cap | Dodge Cox vs. Fisher 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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