Correlation Between The Fairholme and Dodge Cox
Can any of the company-specific risk be diversified away by investing in both The Fairholme and Dodge Cox 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 The Fairholme and Dodge Cox into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Fairholme Fund and Dodge Cox Stock, you can compare the effects of market volatilities on The Fairholme and Dodge Cox 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 The Fairholme with a short position of Dodge Cox. Check out your portfolio center. Please also check ongoing floating volatility patterns of The Fairholme and Dodge Cox.
Diversification Opportunities for The Fairholme and Dodge Cox
-0.63 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between The and Dodge is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding The Fairholme Fund and Dodge Cox Stock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dodge Cox Stock and The Fairholme 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 The Fairholme Fund are associated (or correlated) with Dodge Cox. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dodge Cox Stock has no effect on the direction of The Fairholme i.e., The Fairholme and Dodge Cox go up and down completely randomly.
Pair Corralation between The Fairholme and Dodge Cox
Assuming the 90 days horizon The Fairholme is expected to generate 3.19 times less return on investment than Dodge Cox. But when comparing it to its historical volatility, The Fairholme Fund is 1.04 times less risky than Dodge Cox. It trades about 0.09 of its potential returns per unit of risk. Dodge Cox Stock is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest 27,403 in Dodge Cox Stock on September 3, 2024 and sell it today you would earn a total of 1,402 from holding Dodge Cox Stock or generate 5.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Fairholme Fund vs. Dodge Cox Stock
Performance |
| Timeline |
| The Fairholme |
| Dodge Cox Stock |
The Fairholme and Dodge Cox Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with The Fairholme and Dodge Cox
The main advantage of trading using opposite The Fairholme and Dodge Cox positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if The Fairholme position performs unexpectedly, Dodge Cox 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 Dodge Cox will offset losses from the drop in Dodge Cox's long position.| The Fairholme vs. Dodge Cox Stock | The Fairholme vs. American Funds American | The Fairholme vs. American Funds American | The Fairholme vs. American Mutual Fund |
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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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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