Correlation Between Clearbridge Large and Franklin Lifesmart

Can any of the company-specific risk be diversified away by investing in both Clearbridge Large and Franklin Lifesmart 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 Franklin Lifesmart 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 Franklin Lifesmart 2045, you can compare the effects of market volatilities on Clearbridge Large and Franklin Lifesmart 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 Franklin Lifesmart. Check out your portfolio center. Please also check ongoing floating volatility patterns of Clearbridge Large and Franklin Lifesmart.

Diversification Opportunities for Clearbridge Large and Franklin Lifesmart

0.63

Correlation Coefficient

Clearbridge Large  Franklin Lifesmart

Poor diversification

The 3 months correlation between Clearbridge and Franklin is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Clearbridge Large Cap and Franklin Lifesmart 2045 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Lifesmart 2045 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 Franklin Lifesmart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Lifesmart 2045 has no effect on the direction of Clearbridge Large i.e., Clearbridge Large and Franklin Lifesmart go up and down completely randomly.

Pair Corralation between Clearbridge Large and Franklin Lifesmart

Assuming the 90 days horizon Clearbridge Large Cap is expected to under-perform the Franklin Lifesmart. But the mutual fund apears to be less risky and, when comparing its historical volatility, Clearbridge Large Cap is 1.3 times less risky than Franklin Lifesmart. The mutual fund trades about -0.26 of its potential returns per unit of risk. The Franklin Lifesmart 2045 is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  1,526  in Franklin Lifesmart 2045 on September 20, 2024 and sell it today you would lose (18.00) from holding Franklin Lifesmart 2045 or give up 1.18% of portfolio value over 90 days.

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

Clearbridge Large Cap  vs.  Franklin Lifesmart 2045

Clearbridge Large Cap

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Clearbridge Large Cap are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Clearbridge Large is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Franklin Lifesmart 2045

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Franklin Lifesmart 2045 has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Franklin Lifesmart is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Clearbridge Large and Franklin Lifesmart

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

The idea behind Clearbridge Large Cap and Franklin Lifesmart 2045 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.