Correlation Between Tax-managed and Clearbridge Dividend

Can any of the company-specific risk be diversified away by investing in both Tax-managed and Clearbridge Dividend 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 Dividend 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 Dividend Strategy, you can compare the effects of market volatilities on Tax-managed and Clearbridge Dividend 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 Dividend. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tax-managed and Clearbridge Dividend.

Diversification Opportunities for Tax-managed and Clearbridge Dividend

0.92

Correlation Coefficient

Tax-managed  Clearbridge Dividend

Almost no diversification

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

Pair Corralation between Tax-managed and Clearbridge Dividend

Assuming the 90 days horizon Tax Managed Mid Small is expected to generate 1.8 times more return on investment than Clearbridge Dividend. However, Tax-managed is 1.8 times more volatile than Clearbridge Dividend Strategy. It trades about 0.15 of its potential returns per unit of risk. Clearbridge Dividend Strategy is currently generating about 0.19 per unit of risk. If you would invest  4,115  in Tax Managed Mid Small on August 31, 2024 and sell it today you would earn a total of  446.00  from holding Tax Managed Mid Small or generate 10.84% return on investment over 90 days.

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

Tax Managed Mid Small  vs.  Clearbridge Dividend Strategy

Tax Managed Mid

Risk-Adjusted Performance

12 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tax Managed Mid Small are ranked lower than 12 (%) 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 December 2024.

Clearbridge Dividend

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Clearbridge Dividend Strategy are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak essential indicators, Clearbridge Dividend may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Tax-managed and Clearbridge Dividend

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

The idea behind Tax Managed Mid Small and Clearbridge Dividend Strategy 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.