Correlation Between Dodge Cox and Vanguard Equity
Can any of the company-specific risk be diversified away by investing in both Dodge Cox and Vanguard 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 Vanguard 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 Vanguard Equity Income, you can compare the effects of market volatilities on Dodge Cox and Vanguard 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 Vanguard Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dodge Cox and Vanguard Equity.
Diversification Opportunities for Dodge Cox and Vanguard Equity
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Dodge and Vanguard is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Dodge Cox Stock and Vanguard Equity Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard 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 Vanguard Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Equity Income has no effect on the direction of Dodge Cox i.e., Dodge Cox and Vanguard Equity go up and down completely randomly.
Pair Corralation between Dodge Cox and Vanguard Equity
Assuming the 90 days horizon Dodge Cox Stock is expected to generate 0.95 times more return on investment than Vanguard Equity. However, Dodge Cox Stock is 1.05 times less risky than Vanguard Equity. It trades about 0.16 of its potential returns per unit of risk. Vanguard Equity Income is currently generating about 0.12 per unit of risk. If you would invest 21,395 in Dodge Cox Stock on September 1, 2024 and sell it today you would earn a total of 7,340 from holding Dodge Cox Stock or generate 34.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.63% |
| Values | Daily Returns |
Dodge Cox Stock vs. Vanguard Equity Income
Performance |
| Timeline |
| Dodge Cox Stock |
| Vanguard Equity Income |
Dodge Cox and Vanguard Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dodge Cox and Vanguard Equity
The main advantage of trading using opposite Dodge Cox and Vanguard Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dodge Cox position performs unexpectedly, Vanguard 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 Vanguard Equity will offset losses from the drop in Vanguard 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 |
| Vanguard Equity vs. Vanguard Wellington Fund | Vanguard Equity vs. Vanguard Wellesley Income | Vanguard Equity vs. Vanguard Mid Cap Index | Vanguard Equity vs. Vanguard Health Care |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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