Correlation Between Legg Mason and Dodge Stock
Can any of the company-specific risk be diversified away by investing in both Legg Mason and Dodge Stock 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 Stock 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 Stock Fund, you can compare the effects of market volatilities on Legg Mason and Dodge Stock 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 Stock. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legg Mason and Dodge Stock.
Diversification Opportunities for Legg Mason and Dodge Stock
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Legg and Dodge is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Bw and Dodge Stock Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dodge Stock Fund 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 Stock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dodge Stock Fund has no effect on the direction of Legg Mason i.e., Legg Mason and Dodge Stock go up and down completely randomly.
Pair Corralation between Legg Mason and Dodge Stock
Assuming the 90 days horizon Legg Mason Bw is expected to generate 0.96 times more return on investment than Dodge Stock. However, Legg Mason Bw is 1.04 times less risky than Dodge Stock. It trades about 0.08 of its potential returns per unit of risk. Dodge Stock Fund is currently generating about 0.07 per unit of risk. If you would invest 1,996 in Legg Mason Bw on December 28, 2024 and sell it today you would earn a total of 74.00 from holding Legg Mason Bw or generate 3.71% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 98.36% |
Values | Daily Returns |
Legg Mason Bw vs. Dodge Stock Fund
Performance |
Timeline |
Legg Mason Bw |
Dodge Stock Fund |
Legg Mason and Dodge Stock Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Legg Mason and Dodge Stock
The main advantage of trading using opposite Legg Mason and Dodge Stock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legg Mason position performs unexpectedly, Dodge Stock 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 Stock will offset losses from the drop in Dodge Stock's long position.Legg Mason vs. Aqr Risk Balanced Modities | Legg Mason vs. Metropolitan West High | Legg Mason vs. Aqr Risk Parity | Legg Mason vs. Ab High Income |
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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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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