Correlation Between New World and Dodge Cox
Can any of the company-specific risk be diversified away by investing in both New World 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 New World and Dodge Cox into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between New World Fund and Dodge Cox Emerging, you can compare the effects of market volatilities on New World 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 New World with a short position of Dodge Cox. Check out your portfolio center. Please also check ongoing floating volatility patterns of New World and Dodge Cox.
Diversification Opportunities for New World and Dodge Cox
Very poor diversification
The 3 months correlation between New and Dodge is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding New World Fund and Dodge Cox Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dodge Cox Emerging and New World 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 New World 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 Emerging has no effect on the direction of New World i.e., New World and Dodge Cox go up and down completely randomly.
Pair Corralation between New World and Dodge Cox
Assuming the 90 days horizon New World is expected to generate 1.2 times less return on investment than Dodge Cox. But when comparing it to its historical volatility, New World Fund is 1.2 times less risky than Dodge Cox. It trades about 0.05 of its potential returns per unit of risk. Dodge Cox Emerging is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 767.00 in Dodge Cox Emerging on August 30, 2024 and sell it today you would earn a total of 141.00 from holding Dodge Cox Emerging or generate 18.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
New World Fund vs. Dodge Cox Emerging
Performance |
| Timeline |
| New World Fund |
| Dodge Cox Emerging |
New World and Dodge Cox Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New World and Dodge Cox
The main advantage of trading using opposite New World and Dodge Cox positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New World 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.| New World vs. Smallcap World Fund | New World vs. Investment Of America | New World vs. Europacific Growth Fund | New World vs. Capital World Growth |
| Dodge Cox vs. Vanguard Emerging Markets | Dodge Cox vs. Vanguard Emerging Markets | Dodge Cox vs. HUMANA INC | Dodge Cox vs. Aquagold International |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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