Correlation Between Clearbridge Aggressive and Franklin Equity

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

By analyzing existing cross correlation between Clearbridge Aggressive Growth and Franklin Equity Income, you can compare the effects of market volatilities on Clearbridge Aggressive and Franklin Equity 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 Aggressive with a short position of Franklin Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Clearbridge Aggressive and Franklin Equity.

Diversification Opportunities for Clearbridge Aggressive and Franklin Equity

0.98

Correlation Coefficient

Clearbridge Aggressive  Franklin Equity

Almost no diversification

The 3 months correlation between Clearbridge and Franklin is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Clearbridge Aggressive Growth and Franklin Equity Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Equity Income and Clearbridge Aggressive 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 Aggressive Growth are associated (or correlated) with Franklin Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Equity Income has no effect on the direction of Clearbridge Aggressive i.e., Clearbridge Aggressive and Franklin Equity go up and down completely randomly.

Pair Corralation between Clearbridge Aggressive and Franklin Equity

Assuming the 90 days horizon Clearbridge Aggressive Growth is expected to generate 1.52 times more return on investment than Franklin Equity. However, Clearbridge Aggressive is 1.52 times more volatile than Franklin Equity Income. It trades about 0.31 of its potential returns per unit of risk. Franklin Equity Income is currently generating about 0.34 per unit of risk. If you would invest  14,686  in Clearbridge Aggressive Growth on September 3, 2024 and sell it today you would earn a total of  1,062  from holding Clearbridge Aggressive Growth or generate 7.23% return on investment over 90 days.

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

Clearbridge Aggressive Growth  vs.  Franklin Equity Income

Clearbridge Aggressive

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Clearbridge Aggressive Growth are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Clearbridge Aggressive may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Franklin Equity Income

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Equity Income 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, Franklin Equity may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Clearbridge Aggressive and Franklin Equity

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

The idea behind Clearbridge Aggressive Growth and Franklin Equity Income 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.