Correlation Between Dodge Cox and Legg Mason
Can any of the company-specific risk be diversified away by investing in both Dodge Cox and Legg Mason 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 Dodge Cox and Legg Mason into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dodge Cox Stock and Legg Mason Bw, you can compare the effects of market volatilities on Dodge Cox and Legg Mason 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 Dodge Cox with a short position of Legg Mason. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dodge Cox and Legg Mason.
Diversification Opportunities for Dodge Cox and Legg Mason
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Dodge and Legg is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Dodge Cox Stock and Legg Mason Bw in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Legg Mason Bw and Dodge Cox 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 Dodge Cox Stock are associated (or correlated) with Legg Mason. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Legg Mason Bw has no effect on the direction of Dodge Cox i.e., Dodge Cox and Legg Mason go up and down completely randomly.
Pair Corralation between Dodge Cox and Legg Mason
Assuming the 90 days horizon Dodge Cox is expected to generate 1.38 times less return on investment than Legg Mason. But when comparing it to its historical volatility, Dodge Cox Stock is 1.11 times less risky than Legg Mason. It trades about 0.13 of its potential returns per unit of risk. Legg Mason Bw is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 2,190 in Legg Mason Bw on August 28, 2024 and sell it today you would earn a total of 177.00 from holding Legg Mason Bw or generate 8.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dodge Cox Stock vs. Legg Mason Bw
Performance |
| Timeline |
| Dodge Cox Stock |
| Legg Mason Bw |
Dodge Cox and Legg Mason Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dodge Cox and Legg Mason
The main advantage of trading using opposite Dodge Cox and Legg Mason positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dodge Cox position performs unexpectedly, Legg Mason 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 Legg Mason will offset losses from the drop in Legg Mason's long position.| Dodge Cox vs. Dodge International Stock | Dodge Cox vs. Dodge Balanced Fund | Dodge Cox vs. Dodge Income Fund | Dodge Cox vs. Total Return Fund |
| Legg Mason vs. Clearbridge Aggressive Growth | Legg Mason vs. Clearbridge Small Cap | Legg Mason vs. Qs International Equity | Legg Mason vs. Clearbridge Appreciation Fund |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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