Correlation Between Clearbridge Appreciation and Western Asset

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

By analyzing existing cross correlation between Clearbridge Appreciation Fund and Western Asset E, you can compare the effects of market volatilities on Clearbridge Appreciation and Western Asset 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 Appreciation with a short position of Western Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Clearbridge Appreciation and Western Asset.

Diversification Opportunities for Clearbridge Appreciation and Western Asset

0.6

Correlation Coefficient

Clearbridge Appreciation  Western Asset

Poor diversification

The 3 months correlation between Clearbridge and Western is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Clearbridge Appreciation Fund and Western Asset E in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset E and Clearbridge Appreciation 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 Appreciation Fund are associated (or correlated) with Western Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Asset E has no effect on the direction of Clearbridge Appreciation i.e., Clearbridge Appreciation and Western Asset go up and down completely randomly.

Pair Corralation between Clearbridge Appreciation and Western Asset

Assuming the 90 days horizon Clearbridge Appreciation Fund is expected to under-perform the Western Asset. In addition to that, Clearbridge Appreciation is 3.98 times more volatile than Western Asset E. It trades about -0.12 of its total potential returns per unit of risk. Western Asset E is currently generating about 0.01 per unit of volatility. If you would invest  1,034  in Western Asset E on October 22, 2024 and sell it today you would earn a total of  2.00  from holding Western Asset E or generate 0.19% return on investment over 90 days.

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

Clearbridge Appreciation Fund  vs.  Western Asset E

Clearbridge Appreciation

Risk-Adjusted Performance

0 of 100

Very Weak

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

Western Asset E

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Western Asset E has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Western Asset 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 Appreciation and Western Asset

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

The idea behind Clearbridge Appreciation Fund and Western Asset E 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.