Correlation Between American Mutual and Dodge Cox

By analyzing existing cross correlation between American Mutual and Dodge Cox Stock, you can compare the effects of market volatilities on American Mutual 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 American Mutual with a short position of Dodge Cox. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Mutual and Dodge Cox.

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Can any of the company-specific risk be diversified away by investing in both American Mutual 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 American Mutual and Dodge Cox into the same portfolio, which is an essential part of the fundamental portfolio management process.

Diversification Opportunities for American Mutual and Dodge Cox

0.57
  Correlation Coefficient
American Mutual
Dodge Cox Stock

Very weak diversification

The 3 months correlation between American and Dodge is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding American Mutual 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 American Mutual 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 American Mutual 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 American Mutual i.e., American Mutual and Dodge Cox go up and down completely randomly.

Pair Corralation between American Mutual and Dodge Cox

Assuming the 90 days horizon American Mutual is expected to generate 0.66 times more return on investment than Dodge Cox. However, American Mutual is 1.51 times less risky than Dodge Cox. It trades about 0.03 of its potential returns per unit of risk. Dodge Cox Stock is currently generating about -0.05 per unit of risk. If you would invest  4,964  in American Mutual on May 4, 2021 and sell it today you would earn a total of  36.00  from holding American Mutual or generate 0.73% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

American Mutual  vs.  Dodge Cox Stock

 Performance (%) 
      Timeline 
American Mutual 
 American Performance
3 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in American Mutual are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, American Mutual is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Dodge Cox Stock 
 Dodge Performance
2 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Dodge Cox Stock are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Dodge Cox is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

American Mutual and Dodge Cox Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with American Mutual and Dodge Cox

The main advantage of trading using opposite American Mutual and Dodge Cox positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Mutual 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.
The idea behind American Mutual and Dodge Cox Stock pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.

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