Correlation Between Tax-managed and Clearbridge Small

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

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

Diversification Opportunities for Tax-managed and Clearbridge Small

0.94

Correlation Coefficient

Tax-managed  Clearbridge Small

Almost no diversification

The 3 months correlation between Tax-managed and Clearbridge is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Tax Managed Mid Small and Clearbridge Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clearbridge Small Cap and Tax-managed 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 Tax Managed Mid Small are associated (or correlated) with Clearbridge Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clearbridge Small Cap has no effect on the direction of Tax-managed i.e., Tax-managed and Clearbridge Small go up and down completely randomly.

Pair Corralation between Tax-managed and Clearbridge Small

Assuming the 90 days horizon Tax-managed is expected to generate 1.11 times less return on investment than Clearbridge Small. In addition to that, Tax-managed is 1.03 times more volatile than Clearbridge Small Cap. It trades about 0.17 of its total potential returns per unit of risk. Clearbridge Small Cap is currently generating about 0.19 per unit of volatility. If you would invest  6,892  in Clearbridge Small Cap on September 5, 2024 and sell it today you would earn a total of  932.00  from holding Clearbridge Small Cap or generate 13.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.44%
Values	Daily Returns

Tax Managed Mid Small  vs.  Clearbridge Small Cap

Tax Managed Mid

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tax Managed Mid Small are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Tax-managed may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Clearbridge Small Cap

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Clearbridge Small Cap are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Clearbridge Small showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tax-managed and Clearbridge Small

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

The idea behind Tax Managed Mid Small and Clearbridge 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.