Correlation Between American Funds and Dodge Balanced
Can any of the company-specific risk be diversified away by investing in both American Funds and Dodge Balanced 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 Funds and Dodge Balanced into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds Income and Dodge Balanced Fund, you can compare the effects of market volatilities on American Funds and Dodge Balanced 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 Funds with a short position of Dodge Balanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Dodge Balanced.
Diversification Opportunities for American Funds and Dodge Balanced
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between American and Dodge is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Income and Dodge Balanced Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dodge Balanced and American Funds 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 Funds Income are associated (or correlated) with Dodge Balanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dodge Balanced has no effect on the direction of American Funds i.e., American Funds and Dodge Balanced go up and down completely randomly.
Pair Corralation between American Funds and Dodge Balanced
Assuming the 90 days horizon American Funds is expected to generate 2.34 times less return on investment than Dodge Balanced. But when comparing it to its historical volatility, American Funds Income is 1.35 times less risky than Dodge Balanced. It trades about 0.03 of its potential returns per unit of risk. Dodge Balanced Fund is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 10,005 in Dodge Balanced Fund on January 27, 2024 and sell it today you would earn a total of 190.00 from holding Dodge Balanced Fund or generate 1.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Funds Income vs. Dodge Balanced Fund
Performance |
| Timeline |
| American Funds Me |
| Dodge Balanced |
American Funds and Dodge Balanced Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Dodge Balanced
The main advantage of trading using opposite American Funds and Dodge Balanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Dodge Balanced 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 Balanced will offset losses from the drop in Dodge Balanced's long position.| American Funds vs. Franklin Federal Limited Term | American Funds vs. Touchstone Ultra Short | American Funds vs. Astor Longshort Fund | American Funds vs. Short Intermediate Bond Fund |
| Dodge Balanced vs. Dodge Stock Fund | Dodge Balanced vs. Dodge International Stock | Dodge Balanced vs. Dodge Income Fund | Dodge Balanced vs. Oakmark Equity And |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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