Correlation Between Fairholme Fund and Dodge Balanced

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

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

Diversification Opportunities for Fairholme Fund and Dodge Balanced

0.55

Correlation Coefficient

Fairholme Fund  Dodge Balanced

Very weak diversification

The 3 months correlation between Fairholme and Dodge is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding The Fairholme Fund and Dodge Balanced Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dodge Balanced and Fairholme Fund 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 The Fairholme Fund 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 Fairholme Fund i.e., Fairholme Fund and Dodge Balanced go up and down completely randomly.

Pair Corralation between Fairholme Fund and Dodge Balanced

Assuming the 90 days horizon The Fairholme Fund is expected to generate 2.64 times more return on investment than Dodge Balanced. However, Fairholme Fund is 2.64 times more volatile than Dodge Balanced Fund. It trades about 0.1 of its potential returns per unit of risk. Dodge Balanced Fund is currently generating about 0.04 per unit of risk. If you would invest  3,307  in The Fairholme Fund on February 2, 2024 and sell it today you would earn a total of  211.00  from holding The Fairholme Fund or generate 6.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

The Fairholme Fund  vs.  Dodge Balanced Fund

Fairholme Fund

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in The Fairholme Fund are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Fairholme Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Dodge Balanced

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Dodge Balanced Fund are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental drivers, Dodge Balanced is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Fairholme Fund and Dodge Balanced

The main advantage of trading using opposite Fairholme Fund and Dodge Balanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fairholme Fund 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.

The idea behind The Fairholme Fund and Dodge Balanced Fund 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.

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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 Bonds Directory module to find actively traded corporate debentures issued by US companies.