Correlation Between American Funds and Clearbridge Value

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

By analyzing existing cross correlation between American Funds Inflation and Clearbridge Value Trust, you can compare the effects of market volatilities on American Funds and Clearbridge Value 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 American Funds with a short position of Clearbridge Value. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Clearbridge Value.

Diversification Opportunities for American Funds and Clearbridge Value

-0.63

Correlation Coefficient

American Funds  Clearbridge Value

Excellent diversification

The 3 months correlation between American and Clearbridge is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Inflation and Clearbridge Value Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clearbridge Value Trust and American Funds 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 American Funds Inflation are associated (or correlated) with Clearbridge Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clearbridge Value Trust has no effect on the direction of American Funds i.e., American Funds and Clearbridge Value go up and down completely randomly.

Pair Corralation between American Funds and Clearbridge Value

Assuming the 90 days horizon American Funds Inflation is expected to under-perform the Clearbridge Value. But the mutual fund apears to be less risky and, when comparing its historical volatility, American Funds Inflation is 4.99 times less risky than Clearbridge Value. The mutual fund trades about -0.09 of its potential returns per unit of risk. The Clearbridge Value Trust is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  12,431  in Clearbridge Value Trust on September 14, 2024 and sell it today you would lose (143.00) from holding Clearbridge Value Trust or give up 1.15% of portfolio value over 90 days.

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

American Funds Inflation  vs.  Clearbridge Value Trust

American Funds Inflation

Risk-Adjusted Performance

0 of 100

Very Weak

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

Clearbridge Value Trust

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with American Funds and Clearbridge Value

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

The idea behind American Funds Inflation and Clearbridge Value Trust 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.