Correlation Between Dodge Cox and Government Long
Can any of the company-specific risk be diversified away by investing in both Dodge Cox and Government Long 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 Government Long 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 Government Long Bond, you can compare the effects of market volatilities on Dodge Cox and Government Long 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 Government Long. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dodge Cox and Government Long.
Diversification Opportunities for Dodge Cox and Government Long
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Dodge and Government is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Dodge Cox Stock and Government Long Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Government Long Bond 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 Government Long. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Government Long Bond has no effect on the direction of Dodge Cox i.e., Dodge Cox and Government Long go up and down completely randomly.
Pair Corralation between Dodge Cox and Government Long
Assuming the 90 days horizon Dodge Cox Stock is expected to generate 0.8 times more return on investment than Government Long. However, Dodge Cox Stock is 1.25 times less risky than Government Long. It trades about 0.4 of its potential returns per unit of risk. Government Long Bond is currently generating about 0.06 per unit of risk. If you would invest 25,973 in Dodge Cox Stock on November 5, 2024 and sell it today you would earn a total of 1,331 from holding Dodge Cox Stock or generate 5.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dodge Cox Stock vs. Government Long Bond
Performance |
| Timeline |
| Dodge Cox Stock |
| Government Long Bond |
Dodge Cox and Government Long Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dodge Cox and Government Long
The main advantage of trading using opposite Dodge Cox and Government Long positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dodge Cox position performs unexpectedly, Government Long 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 Government Long will offset losses from the drop in Government Long's long position.| Dodge Cox vs. Chartwell Short Duration | Dodge Cox vs. One Choice Portfolio | Dodge Cox vs. Needham Aggressive Growth | Dodge Cox vs. The Hartford High |
| Government Long vs. Vanguard Reit Index | Government Long vs. Neuberger Berman Real | Government Long vs. Fidelity Real Estate | Government Long vs. Jhancock Real Estate |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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