Correlation Between Clearbridge International and Western Asset

Can any of the company-specific risk be diversified away by investing in both Clearbridge International 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 International 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 International Value and Western Asset Smash, you can compare the effects of market volatilities on Clearbridge International 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 International with a short position of Western Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Clearbridge International and Western Asset.

Diversification Opportunities for Clearbridge International and Western Asset

0.78

Correlation Coefficient

Clearbridge International  Western Asset

Poor diversification

The 3 months correlation between Clearbridge and Western is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Clearbridge International Valu and Western Asset Smash in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset Smash and Clearbridge International 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 International Value 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 Smash has no effect on the direction of Clearbridge International i.e., Clearbridge International and Western Asset go up and down completely randomly.

Pair Corralation between Clearbridge International and Western Asset

Assuming the 90 days horizon Clearbridge International Value is expected to under-perform the Western Asset. In addition to that, Clearbridge International is 1.64 times more volatile than Western Asset Smash. It trades about -0.09 of its total potential returns per unit of risk. Western Asset Smash is currently generating about -0.13 per unit of volatility. If you would invest  796.00  in Western Asset Smash on August 31, 2024 and sell it today you would lose (34.00) from holding Western Asset Smash or give up 4.27% of portfolio value over 90 days.

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

Clearbridge International Valu  vs.  Western Asset Smash

Clearbridge International

Risk-Adjusted Performance

0 of 100

Very Weak

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

Western Asset Smash

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Western Asset Smash has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong primary 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 International and Western Asset

The main advantage of trading using opposite Clearbridge International and Western Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Clearbridge International 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 International Value and Western Asset Smash 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.