Correlation Between Invesco Disciplined and Clearbridge Small

Can any of the company-specific risk be diversified away by investing in both Invesco Disciplined and Clearbridge Small 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 Invesco Disciplined and Clearbridge Small into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Invesco Disciplined Equity and Clearbridge Small Cap, you can compare the effects of market volatilities on Invesco Disciplined and Clearbridge Small 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 Invesco Disciplined with a short position of Clearbridge Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco Disciplined and Clearbridge Small.

Diversification Opportunities for Invesco Disciplined and Clearbridge Small

0.83

Correlation Coefficient

Invesco Disciplined  Clearbridge Small

Very poor diversification

The 3 months correlation between Invesco and Clearbridge is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Disciplined Equity and Clearbridge Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clearbridge Small Cap and Invesco Disciplined 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 Invesco Disciplined Equity are associated (or correlated) with Clearbridge Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clearbridge Small Cap has no effect on the direction of Invesco Disciplined i.e., Invesco Disciplined and Clearbridge Small go up and down completely randomly.

Pair Corralation between Invesco Disciplined and Clearbridge Small

Assuming the 90 days horizon Invesco Disciplined is expected to generate 4.45 times less return on investment than Clearbridge Small. But when comparing it to its historical volatility, Invesco Disciplined Equity is 1.08 times less risky than Clearbridge Small. It trades about 0.08 of its potential returns per unit of risk. Clearbridge Small Cap is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest  6,442  in Clearbridge Small Cap on October 24, 2024 and sell it today you would earn a total of  337.00  from holding Clearbridge Small Cap or generate 5.23% return on investment over 90 days.

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

Invesco Disciplined Equity  vs.  Clearbridge Small Cap

Invesco Disciplined

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco Disciplined Equity has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Invesco Disciplined is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Clearbridge Small Cap

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Clearbridge Small Cap are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Clearbridge Small is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Invesco Disciplined and Clearbridge Small

The main advantage of trading using opposite Invesco Disciplined and Clearbridge Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco Disciplined position performs unexpectedly, Clearbridge Small 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 Clearbridge Small will offset losses from the drop in Clearbridge Small's long position.

The idea behind Invesco Disciplined Equity and Clearbridge Small Cap 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 Global Correlations module to find global opportunities by holding instruments from different markets.