Correlation Between ClearBridge Dividend and VictoryShares 500

Can any of the company-specific risk be diversified away by investing in both ClearBridge Dividend and VictoryShares 500 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 Dividend and VictoryShares 500 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ClearBridge Dividend Strategy and VictoryShares 500 Enhanced, you can compare the effects of market volatilities on ClearBridge Dividend and VictoryShares 500 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 Dividend with a short position of VictoryShares 500. Check out your portfolio center. Please also check ongoing floating volatility patterns of ClearBridge Dividend and VictoryShares 500.

Diversification Opportunities for ClearBridge Dividend and VictoryShares 500

0.88

Correlation Coefficient

ClearBridge Dividend  VictoryShares 500

Very poor diversification

The 3 months correlation between ClearBridge and VictoryShares is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding ClearBridge Dividend Strategy and VictoryShares 500 Enhanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VictoryShares 500 and ClearBridge Dividend 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 Dividend Strategy are associated (or correlated) with VictoryShares 500. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VictoryShares 500 has no effect on the direction of ClearBridge Dividend i.e., ClearBridge Dividend and VictoryShares 500 go up and down completely randomly.

Pair Corralation between ClearBridge Dividend and VictoryShares 500

Given the investment horizon of 90 days ClearBridge Dividend is expected to generate 1.78 times less return on investment than VictoryShares 500. But when comparing it to its historical volatility, ClearBridge Dividend Strategy is 1.03 times less risky than VictoryShares 500. It trades about 0.11 of its potential returns per unit of risk. VictoryShares 500 Enhanced is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  7,003  in VictoryShares 500 Enhanced on October 26, 2024 and sell it today you would earn a total of  177.50  from holding VictoryShares 500 Enhanced or generate 2.53% return on investment over 90 days.

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

ClearBridge Dividend Strategy  vs.  VictoryShares 500 Enhanced

ClearBridge Dividend

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ClearBridge Dividend Strategy are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, ClearBridge Dividend is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

VictoryShares 500

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in VictoryShares 500 Enhanced are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, VictoryShares 500 is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with ClearBridge Dividend and VictoryShares 500

The main advantage of trading using opposite ClearBridge Dividend and VictoryShares 500 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ClearBridge Dividend position performs unexpectedly, VictoryShares 500 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 VictoryShares 500 will offset losses from the drop in VictoryShares 500's long position.

The idea behind ClearBridge Dividend Strategy and VictoryShares 500 Enhanced 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.