Correlation Between Hennessy Cornerstone and Dodge Cox
Can any of the company-specific risk be diversified away by investing in both Hennessy Cornerstone 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 Hennessy Cornerstone and Dodge Cox into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hennessy Nerstone Large and Dodge Cox Stock, you can compare the effects of market volatilities on Hennessy Cornerstone 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 Hennessy Cornerstone with a short position of Dodge Cox. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hennessy Cornerstone and Dodge Cox.
Diversification Opportunities for Hennessy Cornerstone and Dodge Cox
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Hennessy and Dodge is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Hennessy Nerstone Large 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 Hennessy Cornerstone 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 Hennessy Nerstone Large 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 Hennessy Cornerstone i.e., Hennessy Cornerstone and Dodge Cox go up and down completely randomly.
Pair Corralation between Hennessy Cornerstone and Dodge Cox
Assuming the 90 days horizon Hennessy Nerstone Large is expected to under-perform the Dodge Cox. But the mutual fund apears to be less risky and, when comparing its historical volatility, Hennessy Nerstone Large is 1.07 times less risky than Dodge Cox. The mutual fund trades about -0.06 of its potential returns per unit of risk. The Dodge Cox Stock is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest 26,527 in Dodge Cox Stock on January 14, 2025 and sell it today you would lose (2,071) from holding Dodge Cox Stock or give up 7.81% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hennessy Nerstone Large vs. Dodge Cox Stock
Performance |
| Timeline |
| Hennessy Nerstone Large |
| Dodge Cox Stock |
Hennessy Cornerstone and Dodge Cox Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hennessy Cornerstone and Dodge Cox
The main advantage of trading using opposite Hennessy Cornerstone and Dodge Cox positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hennessy Cornerstone 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.| Hennessy Cornerstone vs. Hennessy Nerstone Mid | Hennessy Cornerstone vs. Hennessy Nerstone Value | Hennessy Cornerstone vs. Hennessy Total Return | Hennessy Cornerstone vs. Walden Equity Fund |
| Dodge Cox vs. T Rowe Price | Dodge Cox vs. Hartford Moderate Allocation | Dodge Cox vs. Fidelity Managed Retirement | Dodge Cox vs. T Rowe Price |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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