Correlation Between Clearbridge Appreciation and Franklin Growth

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

Diversification Opportunities for Clearbridge Appreciation and Franklin Growth

0.61

Correlation Coefficient

Clearbridge Appreciation  Franklin Growth

Poor diversification

The 3 months correlation between Clearbridge and Franklin is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Clearbridge Appreciation Fund and Franklin Growth Allocation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Growth Allo 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 Franklin Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Growth Allo has no effect on the direction of Clearbridge Appreciation i.e., Clearbridge Appreciation and Franklin Growth go up and down completely randomly.

Pair Corralation between Clearbridge Appreciation and Franklin Growth

Assuming the 90 days horizon Clearbridge Appreciation Fund is expected to under-perform the Franklin Growth. In addition to that, Clearbridge Appreciation is 3.27 times more volatile than Franklin Growth Allocation. It trades about -0.22 of its total potential returns per unit of risk. Franklin Growth Allocation is currently generating about -0.13 per unit of volatility. If you would invest  2,090  in Franklin Growth Allocation on September 24, 2024 and sell it today you would lose (35.00) from holding Franklin Growth Allocation or give up 1.67% of portfolio value over 90 days.

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

Clearbridge Appreciation Fund  vs.  Franklin Growth Allocation

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 basic indicators, Clearbridge Appreciation is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Franklin Growth Allo

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Franklin Growth Allocation has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Franklin Growth 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 Franklin Growth

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

The idea behind Clearbridge Appreciation Fund and Franklin Growth Allocation 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..