Correlation Between Health Care and Dodge Cox
Can any of the company-specific risk be diversified away by investing in both Health Care 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 Health Care and Dodge Cox into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Health Care Ultrasector and Dodge International Stock, you can compare the effects of market volatilities on Health Care 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 Health Care with a short position of Dodge Cox. Check out your portfolio center. Please also check ongoing floating volatility patterns of Health Care and Dodge Cox.
Diversification Opportunities for Health Care and Dodge Cox
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Health and Dodge is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Health Care Ultrasector and Dodge International Stock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dodge International Stock and Health Care 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 Health Care Ultrasector 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 International Stock has no effect on the direction of Health Care i.e., Health Care and Dodge Cox go up and down completely randomly.
Pair Corralation between Health Care and Dodge Cox
Assuming the 90 days horizon Health Care Ultrasector is expected to generate 1.4 times more return on investment than Dodge Cox. However, Health Care is 1.4 times more volatile than Dodge International Stock. It trades about 0.14 of its potential returns per unit of risk. Dodge International Stock is currently generating about 0.11 per unit of risk. If you would invest 7,815 in Health Care Ultrasector on October 21, 2024 and sell it today you would earn a total of 210.00 from holding Health Care Ultrasector or generate 2.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Health Care Ultrasector vs. Dodge International Stock
Performance |
| Timeline |
| Health Care Ultrasector |
| Dodge International Stock |
Health Care and Dodge Cox Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Health Care and Dodge Cox
The main advantage of trading using opposite Health Care and Dodge Cox positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Health Care 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.| Health Care vs. Short Real Estate | Health Care vs. Short Real Estate | Health Care vs. Ultrashort Mid Cap Profund | Health Care vs. Ultrashort Mid Cap Profund |
| Dodge Cox vs. Dodge Stock Fund | Dodge Cox vs. Dodge Income Fund | Dodge Cox vs. Dodge Balanced Fund | Dodge Cox vs. The Fairholme Fund |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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