Correlation Between International Equity and Clearbridge Mid

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

By analyzing existing cross correlation between International Equity Series and Clearbridge Mid Cap, you can compare the effects of market volatilities on International Equity and Clearbridge Mid 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 International Equity with a short position of Clearbridge Mid. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Equity and Clearbridge Mid.

Diversification Opportunities for International Equity and Clearbridge Mid

-0.47

Correlation Coefficient

International Equity  Clearbridge Mid

Very good diversification

The 3 months correlation between International and Clearbridge is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding International Equity Series and Clearbridge Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clearbridge Mid Cap and International Equity 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 International Equity Series are associated (or correlated) with Clearbridge Mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clearbridge Mid Cap has no effect on the direction of International Equity i.e., International Equity and Clearbridge Mid go up and down completely randomly.

Pair Corralation between International Equity and Clearbridge Mid

Assuming the 90 days horizon International Equity Series is expected to under-perform the Clearbridge Mid. But the mutual fund apears to be less risky and, when comparing its historical volatility, International Equity Series is 1.04 times less risky than Clearbridge Mid. The mutual fund trades about -0.02 of its potential returns per unit of risk. The Clearbridge Mid Cap is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  3,401  in Clearbridge Mid Cap on September 5, 2024 and sell it today you would earn a total of  486.00  from holding Clearbridge Mid Cap or generate 14.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

International Equity Series  vs.  Clearbridge Mid Cap

International Equity

Risk-Adjusted Performance

0 of 100

Very Weak

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

Clearbridge Mid Cap

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Clearbridge Mid Cap are ranked lower than 19 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Clearbridge Mid showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with International Equity and Clearbridge Mid

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

The idea behind International Equity Series and Clearbridge Mid Cap 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.