Correlation Between Clearbridge Large and Clearbridge Value

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

Diversification Opportunities for Clearbridge Large and Clearbridge Value

0.88

Correlation Coefficient

Clearbridge Large  Clearbridge Value

Very poor diversification

The 3 months correlation between Clearbridge and Clearbridge is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Clearbridge Large Cap and Clearbridge Value Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clearbridge Value Trust 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 Clearbridge Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clearbridge Value Trust has no effect on the direction of Clearbridge Large i.e., Clearbridge Large and Clearbridge Value go up and down completely randomly.

Pair Corralation between Clearbridge Large and Clearbridge Value

Assuming the 90 days horizon Clearbridge Large Cap is expected to under-perform the Clearbridge Value. But the mutual fund apears to be less risky and, when comparing its historical volatility, Clearbridge Large Cap is 1.16 times less risky than Clearbridge Value. The mutual fund trades about -0.16 of its potential returns per unit of risk. The Clearbridge Value Trust is currently generating about -0.14 of returns per unit of risk over similar time horizon. If you would invest  10,776  in Clearbridge Value Trust on December 2, 2024 and sell it today you would lose (1,342) from holding Clearbridge Value Trust or give up 12.45% of portfolio value over 90 days.

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

Clearbridge Large Cap  vs.  Clearbridge Value Trust

Clearbridge Large Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Clearbridge Large Cap 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 technical and fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Clearbridge Value Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days Clearbridge Value Trust 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 April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Clearbridge Large and Clearbridge Value

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

The idea behind Clearbridge Large Cap and Clearbridge Value Trust 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 Global Correlations module to find global opportunities by holding instruments from different markets.