Correlation Between Dodge Cox and Washington Mutual
Can any of the company-specific risk be diversified away by investing in both Dodge Cox and Washington Mutual 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 Washington Mutual 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 Washington Mutual Investors, you can compare the effects of market volatilities on Dodge Cox and Washington Mutual 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 Washington Mutual. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dodge Cox and Washington Mutual.
Diversification Opportunities for Dodge Cox and Washington Mutual
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Dodge and Washington is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Dodge Cox Stock and Washington Mutual Investors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Washington Mutual 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 Washington Mutual. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Washington Mutual has no effect on the direction of Dodge Cox i.e., Dodge Cox and Washington Mutual go up and down completely randomly.
Pair Corralation between Dodge Cox and Washington Mutual
Assuming the 90 days horizon Dodge Cox Stock is expected to generate 0.75 times more return on investment than Washington Mutual. However, Dodge Cox Stock is 1.33 times less risky than Washington Mutual. It trades about 0.09 of its potential returns per unit of risk. Washington Mutual Investors is currently generating about 0.05 per unit of risk. If you would invest 20,877 in Dodge Cox Stock on September 3, 2024 and sell it today you would earn a total of 7,928 from holding Dodge Cox Stock or generate 37.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dodge Cox Stock vs. Washington Mutual Investors
Performance |
| Timeline |
| Dodge Cox Stock |
| Washington Mutual |
Dodge Cox and Washington Mutual Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dodge Cox and Washington Mutual
The main advantage of trading using opposite Dodge Cox and Washington Mutual positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dodge Cox position performs unexpectedly, Washington Mutual 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 Washington Mutual will offset losses from the drop in Washington Mutual's long position.| Dodge Cox vs. Tekla Healthcare Opportunities | Dodge Cox vs. Health Biotchnology Portfolio | Dodge Cox vs. Eventide Healthcare Life | Dodge Cox vs. Lord Abbett Health |
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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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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