Correlation Between Legg Mason and Dodge Cox
Can any of the company-specific risk be diversified away by investing in both Legg Mason 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 Legg Mason and Dodge Cox into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Legg Mason Bw and Dodge Cox Stock, you can compare the effects of market volatilities on Legg Mason 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 Legg Mason with a short position of Dodge Cox. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legg Mason and Dodge Cox.
Diversification Opportunities for Legg Mason and Dodge Cox
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Legg and Dodge is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Bw 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 Legg Mason 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 Legg Mason Bw 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 Legg Mason i.e., Legg Mason and Dodge Cox go up and down completely randomly.
Pair Corralation between Legg Mason and Dodge Cox
Assuming the 90 days horizon Legg Mason Bw is expected to generate 1.08 times more return on investment than Dodge Cox. However, Legg Mason is 1.08 times more volatile than Dodge Cox Stock. It trades about 0.16 of its potential returns per unit of risk. Dodge Cox Stock is currently generating about 0.14 per unit of risk. If you would invest 1,803 in Legg Mason Bw on September 4, 2024 and sell it today you would earn a total of 571.00 from holding Legg Mason Bw or generate 31.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Legg Mason Bw vs. Dodge Cox Stock
Performance |
| Timeline |
| Legg Mason Bw |
| Dodge Cox Stock |
Legg Mason and Dodge Cox Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Legg Mason and Dodge Cox
The main advantage of trading using opposite Legg Mason and Dodge Cox positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legg Mason 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.| Legg Mason vs. Clearbridge Aggressive Growth | Legg Mason vs. Clearbridge Small Cap | Legg Mason vs. Qs International Equity | Legg Mason vs. Clearbridge Appreciation Fund |
| Dodge Cox vs. T Rowe Price | Dodge Cox vs. T Rowe Price | Dodge Cox vs. T Rowe Price | Dodge Cox vs. T Rowe Price |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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