Correlation Between Oil Gas and Clearbridge Mid

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

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

Diversification Opportunities for Oil Gas and Clearbridge Mid

0.69

Correlation Coefficient

Oil Gas  Clearbridge Mid

Poor diversification

The 3 months correlation between Oil and Clearbridge is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Oil Gas Ultrasector and Clearbridge Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clearbridge Mid Cap and Oil Gas 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 Oil Gas Ultrasector are associated (or correlated) with Clearbridge Mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clearbridge Mid Cap has no effect on the direction of Oil Gas i.e., Oil Gas and Clearbridge Mid go up and down completely randomly.

Pair Corralation between Oil Gas and Clearbridge Mid

Assuming the 90 days horizon Oil Gas Ultrasector is expected to generate 1.66 times more return on investment than Clearbridge Mid. However, Oil Gas is 1.66 times more volatile than Clearbridge Mid Cap. It trades about 0.01 of its potential returns per unit of risk. Clearbridge Mid Cap is currently generating about 0.01 per unit of risk. If you would invest  3,432  in Oil Gas Ultrasector on November 20, 2024 and sell it today you would earn a total of  126.00  from holding Oil Gas Ultrasector or generate 3.67% return on investment over 90 days.

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

Oil Gas Ultrasector  vs.  Clearbridge Mid Cap

Oil Gas Ultrasector

Risk-Adjusted Performance

Very Weak

Over the last 90 days Oil Gas Ultrasector has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Clearbridge Mid Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Clearbridge Mid Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's essential indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Oil Gas and Clearbridge Mid

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

The idea behind Oil Gas Ultrasector and Clearbridge Mid 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.