Correlation Between ClearBridge Large and VictoryShares 500

Can any of the company-specific risk be diversified away by investing in both ClearBridge Large and VictoryShares 500 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 Large and VictoryShares 500 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ClearBridge Large Cap and VictoryShares 500 Enhanced, you can compare the effects of market volatilities on ClearBridge Large and VictoryShares 500 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 Large with a short position of VictoryShares 500. Check out your portfolio center. Please also check ongoing floating volatility patterns of ClearBridge Large and VictoryShares 500.

Diversification Opportunities for ClearBridge Large and VictoryShares 500

0.62

Correlation Coefficient

ClearBridge Large  VictoryShares 500

Poor diversification

The 3 months correlation between ClearBridge and VictoryShares is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding ClearBridge Large Cap and VictoryShares 500 Enhanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VictoryShares 500 and ClearBridge Large 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 Large Cap are associated (or correlated) with VictoryShares 500. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VictoryShares 500 has no effect on the direction of ClearBridge Large i.e., ClearBridge Large and VictoryShares 500 go up and down completely randomly.

Pair Corralation between ClearBridge Large and VictoryShares 500

Given the investment horizon of 90 days ClearBridge Large Cap is expected to generate 1.2 times more return on investment than VictoryShares 500. However, ClearBridge Large is 1.2 times more volatile than VictoryShares 500 Enhanced. It trades about 0.11 of its potential returns per unit of risk. VictoryShares 500 Enhanced is currently generating about 0.07 per unit of risk. If you would invest  7,417  in ClearBridge Large Cap on October 26, 2024 and sell it today you would earn a total of  452.00  from holding ClearBridge Large Cap or generate 6.09% return on investment over 90 days.

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

ClearBridge Large Cap  vs.  VictoryShares 500 Enhanced

ClearBridge Large Cap

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ClearBridge Large Cap are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile technical and fundamental indicators, ClearBridge Large may actually be approaching a critical reversion point that can send shares even higher in February 2025.

VictoryShares 500

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in VictoryShares 500 Enhanced are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, VictoryShares 500 is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with ClearBridge Large and VictoryShares 500

The main advantage of trading using opposite ClearBridge Large and VictoryShares 500 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ClearBridge Large position performs unexpectedly, VictoryShares 500 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 VictoryShares 500 will offset losses from the drop in VictoryShares 500's long position.

The idea behind ClearBridge Large Cap and VictoryShares 500 Enhanced 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 Transaction History module to view history of all your transactions and understand their impact on performance.