Correlation Between Vanguard Total and Clearbridge Aggressive

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

By analyzing existing cross correlation between Vanguard Total Stock and Clearbridge Aggressive Growth, you can compare the effects of market volatilities on Vanguard Total and Clearbridge Aggressive 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 Vanguard Total with a short position of Clearbridge Aggressive. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Total and Clearbridge Aggressive.

Diversification Opportunities for Vanguard Total and Clearbridge Aggressive

0.94

Correlation Coefficient

Vanguard Total  Clearbridge Aggressive

Almost no diversification

The 3 months correlation between Vanguard and Clearbridge is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total Stock and Clearbridge Aggressive Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clearbridge Aggressive and Vanguard Total 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 Vanguard Total Stock are associated (or correlated) with Clearbridge Aggressive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clearbridge Aggressive has no effect on the direction of Vanguard Total i.e., Vanguard Total and Clearbridge Aggressive go up and down completely randomly.

Pair Corralation between Vanguard Total and Clearbridge Aggressive

Assuming the 90 days horizon Vanguard Total Stock is expected to under-perform the Clearbridge Aggressive. But the mutual fund apears to be less risky and, when comparing its historical volatility, Vanguard Total Stock is 1.35 times less risky than Clearbridge Aggressive. The mutual fund trades about -0.09 of its potential returns per unit of risk. The Clearbridge Aggressive Growth is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  13,313  in Clearbridge Aggressive Growth on December 29, 2024 and sell it today you would lose (785.00) from holding Clearbridge Aggressive Growth or give up 5.9% of portfolio value over 90 days.

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

Vanguard Total Stock  vs.  Clearbridge Aggressive Growth

Vanguard Total Stock

Risk-Adjusted Performance

Very Weak

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

Clearbridge Aggressive

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Vanguard Total and Clearbridge Aggressive

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

The idea behind Vanguard Total Stock and Clearbridge Aggressive Growth 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.