Correlation Between Clearbridge Energy and Northern Arizona

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

By analyzing existing cross correlation between Clearbridge Energy Mlp and Northern Arizona Tax Exempt, you can compare the effects of market volatilities on Clearbridge Energy and Northern Arizona 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 Energy with a short position of Northern Arizona. Check out your portfolio center. Please also check ongoing floating volatility patterns of Clearbridge Energy and Northern Arizona.

Diversification Opportunities for Clearbridge Energy and Northern Arizona

0.36

Correlation Coefficient

Clearbridge Energy  Northern Arizona

Weak diversification

The 3 months correlation between Clearbridge and Northern is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Clearbridge Energy Mlp and Northern Arizona Tax Exempt in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Arizona Tax and Clearbridge Energy 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 Energy Mlp are associated (or correlated) with Northern Arizona. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Arizona Tax has no effect on the direction of Clearbridge Energy i.e., Clearbridge Energy and Northern Arizona go up and down completely randomly.

Pair Corralation between Clearbridge Energy and Northern Arizona

Assuming the 90 days horizon Clearbridge Energy Mlp is expected to generate 5.38 times more return on investment than Northern Arizona. However, Clearbridge Energy is 5.38 times more volatile than Northern Arizona Tax Exempt. It trades about 0.55 of its potential returns per unit of risk. Northern Arizona Tax Exempt is currently generating about -0.05 per unit of risk. If you would invest  4,975  in Clearbridge Energy Mlp on October 20, 2024 and sell it today you would earn a total of  624.00  from holding Clearbridge Energy Mlp or generate 12.54% return on investment over 90 days.

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

Clearbridge Energy Mlp  vs.  Northern Arizona Tax Exempt

Clearbridge Energy Mlp

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Clearbridge Energy Mlp are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Clearbridge Energy showed solid returns over the last few months and may actually be approaching a breakup point.

Northern Arizona Tax

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Northern Arizona Tax Exempt has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Northern Arizona 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 Energy and Northern Arizona

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

The idea behind Clearbridge Energy Mlp and Northern Arizona Tax Exempt 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 Transaction History module to view history of all your transactions and understand their impact on performance.