Correlation Between Dodge Cox and Smart Diversification
Can any of the company-specific risk be diversified away by investing in both Dodge Cox and Smart Diversification 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 Smart Diversification 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 Smart Diversification, you can compare the effects of market volatilities on Dodge Cox and Smart Diversification 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 Smart Diversification. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dodge Cox and Smart Diversification.
Diversification Opportunities for Dodge Cox and Smart Diversification
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dodge and Smart is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Dodge Cox Stock and Smart Diversification in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smart Diversification 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 Smart Diversification. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smart Diversification has no effect on the direction of Dodge Cox i.e., Dodge Cox and Smart Diversification go up and down completely randomly.
Pair Corralation between Dodge Cox and Smart Diversification
Assuming the 90 days horizon Dodge Cox Stock is expected to generate 0.93 times more return on investment than Smart Diversification. However, Dodge Cox Stock is 1.07 times less risky than Smart Diversification. It trades about 0.09 of its potential returns per unit of risk. Smart Diversification is currently generating about 0.08 per unit of risk. If you would invest 19,959 in Dodge Cox Stock on September 14, 2024 and sell it today you would earn a total of 8,093 from holding Dodge Cox Stock or generate 40.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 28.95% |
| Values | Daily Returns |
Dodge Cox Stock vs. Smart Diversification
Performance |
| Timeline |
| Dodge Cox Stock |
| Smart Diversification |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Dodge Cox and Smart Diversification Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dodge Cox and Smart Diversification
The main advantage of trading using opposite Dodge Cox and Smart Diversification positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dodge Cox position performs unexpectedly, Smart Diversification 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 Smart Diversification will offset losses from the drop in Smart Diversification's long position.| Dodge Cox vs. Dodge International Stock | Dodge Cox vs. Dodge Balanced Fund | Dodge Cox vs. Dodge Income Fund | Dodge Cox vs. Total Return Fund |
| Smart Diversification vs. Dodge Cox Stock | Smart Diversification vs. Jhancock Disciplined Value | Smart Diversification vs. Qs Large Cap | Smart Diversification 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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