Correlation Between Microsoft and Dodge Cox
Can any of the company-specific risk be diversified away by investing in both Microsoft 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 Microsoft and Dodge Cox into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Dodge International Stock, you can compare the effects of market volatilities on Microsoft 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 Microsoft with a short position of Dodge Cox. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Dodge Cox.
Diversification Opportunities for Microsoft and Dodge Cox
Modest diversification
The 3 months correlation between Microsoft and Dodge is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft 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 Microsoft 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 Microsoft 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 Microsoft i.e., Microsoft and Dodge Cox go up and down completely randomly.
Pair Corralation between Microsoft and Dodge Cox
Given the investment horizon of 90 days Microsoft is expected to generate 2.33 times more return on investment than Dodge Cox. However, Microsoft is 2.33 times more volatile than Dodge International Stock. It trades about -0.04 of its potential returns per unit of risk. Dodge International Stock is currently generating about -0.21 per unit of risk. If you would invest 42,574 in Microsoft on August 28, 2024 and sell it today you would lose (695.00) from holding Microsoft or give up 1.63% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Dodge International Stock
Performance |
| Timeline |
| Microsoft |
| Dodge International Stock |
Microsoft and Dodge Cox Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Dodge Cox
The main advantage of trading using opposite Microsoft and Dodge Cox positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft 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.| Microsoft vs. GigaCloud Technology Class | Microsoft vs. Arqit Quantum | Microsoft vs. Cemtrex | Microsoft vs. Paysafe |
| 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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