Correlation Between Clearbridge Aggressive and Franklin Biotechnology

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

Diversification Opportunities for Clearbridge Aggressive and Franklin Biotechnology

0.78

Correlation Coefficient

Clearbridge Aggressive  Franklin Biotechnology

Poor diversification

The 3 months correlation between Clearbridge and Franklin is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Clearbridge Aggressive Growth and Franklin Biotechnology Discove in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Biotechnology 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 Biotechnology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Biotechnology has no effect on the direction of Clearbridge Aggressive i.e., Clearbridge Aggressive and Franklin Biotechnology go up and down completely randomly.

Pair Corralation between Clearbridge Aggressive and Franklin Biotechnology

Assuming the 90 days horizon Clearbridge Aggressive Growth is expected to generate 1.18 times more return on investment than Franklin Biotechnology. However, Clearbridge Aggressive is 1.18 times more volatile than Franklin Biotechnology Discovery. It trades about -0.06 of its potential returns per unit of risk. Franklin Biotechnology Discovery is currently generating about -0.2 per unit of risk. If you would invest  14,759  in Clearbridge Aggressive Growth on October 23, 2024 and sell it today you would lose (1,150) from holding Clearbridge Aggressive Growth or give up 7.79% of portfolio value over 90 days.

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

Clearbridge Aggressive Growth  vs.  Franklin Biotechnology Discove

Clearbridge Aggressive

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Clearbridge Aggressive Growth 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.

Franklin Biotechnology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Franklin Biotechnology Discovery has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Clearbridge Aggressive and Franklin Biotechnology

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

The idea behind Clearbridge Aggressive Growth and Franklin Biotechnology Discovery 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.