Correlation Between Capital World and Dodge Cox
Can any of the company-specific risk be diversified away by investing in both Capital 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 Capital 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 Capital World Bond and Dodge Global Bond, you can compare the effects of market volatilities on Capital 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 Capital World with a short position of Dodge Cox. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital World and Dodge Cox.
Diversification Opportunities for Capital World and Dodge Cox
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Capital and Dodge is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Capital World Bond and Dodge Global Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dodge Global Bond and Capital 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 Capital World Bond 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 Global Bond has no effect on the direction of Capital World i.e., Capital World and Dodge Cox go up and down completely randomly.
Pair Corralation between Capital World and Dodge Cox
Assuming the 90 days horizon Capital World Bond is expected to under-perform the Dodge Cox. In addition to that, Capital World is 1.11 times more volatile than Dodge Global Bond. It trades about -0.05 of its total potential returns per unit of risk. Dodge Global Bond is currently generating about 0.05 per unit of volatility. If you would invest 1,090 in Dodge Global Bond on August 31, 2024 and sell it today you would earn a total of 4.00 from holding Dodge Global Bond or generate 0.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Capital World Bond vs. Dodge Global Bond
Performance |
| Timeline |
| Capital World Bond |
| Dodge Global Bond |
Capital World and Dodge Cox Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Capital World and Dodge Cox
The main advantage of trading using opposite Capital World and Dodge Cox positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital 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.| Capital World vs. Lord Abbett Government | Capital World vs. Franklin Government Money | Capital World vs. Virtus Seix Government | Capital World vs. Dws Government Money |
| Dodge Cox vs. Templeton Global Bond | Dodge Cox vs. Capital World Bond | Dodge Cox vs. Capital World Bond | Dodge Cox vs. Capital World Bond |
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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