Correlation Between Clearbridge Value and Brown Advisory

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

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

Diversification Opportunities for Clearbridge Value and Brown Advisory

0.91

Correlation Coefficient

Clearbridge Value  Brown Advisory

Almost no diversification

The 3 months correlation between Clearbridge and Brown is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Clearbridge Value Trust and Brown Advisory Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brown Advisory Small and Clearbridge Value 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 Clearbridge Value Trust are associated (or correlated) with Brown Advisory. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brown Advisory Small has no effect on the direction of Clearbridge Value i.e., Clearbridge Value and Brown Advisory go up and down completely randomly.

Pair Corralation between Clearbridge Value and Brown Advisory

Assuming the 90 days horizon Clearbridge Value Trust is expected to generate 0.87 times more return on investment than Brown Advisory. However, Clearbridge Value Trust is 1.15 times less risky than Brown Advisory. It trades about -0.01 of its potential returns per unit of risk. Brown Advisory Small Cap is currently generating about -0.09 per unit of risk. If you would invest  12,384  in Clearbridge Value Trust on December 30, 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 Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Clearbridge Value Trust  vs.  Brown Advisory Small Cap

Clearbridge Value Trust

Risk-Adjusted Performance

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 basic indicators, Clearbridge Value is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Brown Advisory Small

Risk-Adjusted Performance

Very Weak

Over the last 90 days Brown Advisory Small Cap 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.

Pair Trading with Clearbridge Value and Brown Advisory

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

The idea behind Clearbridge Value Trust and Brown Advisory 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.