Correlation Between First Trust and ClearBridge Large

Can any of the company-specific risk be diversified away by investing in both First Trust and ClearBridge Large 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 First Trust and ClearBridge Large into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for First Trust and ClearBridge Large

0.92

Correlation Coefficient

First Trust  ClearBridge Large

Almost no diversification

The 3 months correlation between First and ClearBridge is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Small and ClearBridge Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ClearBridge Large Cap and First Trust 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 First Trust Small are associated (or correlated) with ClearBridge Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ClearBridge Large Cap has no effect on the direction of First Trust i.e., First Trust and ClearBridge Large go up and down completely randomly.

Pair Corralation between First Trust and ClearBridge Large

Considering the 90-day investment horizon First Trust Small is expected to under-perform the ClearBridge Large. In addition to that, First Trust is 1.18 times more volatile than ClearBridge Large Cap. It trades about -0.1 of its total potential returns per unit of risk. ClearBridge Large Cap is currently generating about -0.09 per unit of volatility. If you would invest  7,657  in ClearBridge Large Cap on December 27, 2024 and sell it today you would lose (488.00) from holding ClearBridge Large Cap or give up 6.37% of portfolio value over 90 days.

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

First Trust Small  vs.  ClearBridge Large Cap

First Trust Small

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Trust Small has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Etf's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the fund shareholders.

ClearBridge Large Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days ClearBridge Large Cap has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Etf's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the fund shareholders.

Pair Trading with First Trust and ClearBridge Large

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

The idea behind First Trust Small and ClearBridge Large 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.