Correlation Between Small Cap and Clearbridge Small
Can any of the company-specific risk be diversified away by investing in both Small Cap and Clearbridge Small 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 Small Cap and Clearbridge Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Small Cap Value and Clearbridge Small Cap, you can compare the effects of market volatilities on Small Cap and Clearbridge Small 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 Small Cap with a short position of Clearbridge Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Clearbridge Small.
Diversification Opportunities for Small Cap and Clearbridge Small
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Small and Clearbridge is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Value and Clearbridge Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clearbridge Small Cap and Small Cap 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 Small Cap Value are associated (or correlated) with Clearbridge Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clearbridge Small Cap has no effect on the direction of Small Cap i.e., Small Cap and Clearbridge Small go up and down completely randomly.
Pair Corralation between Small Cap and Clearbridge Small
Assuming the 90 days horizon Small Cap Value is expected to under-perform the Clearbridge Small. But the mutual fund apears to be less risky and, when comparing its historical volatility, Small Cap Value is 1.05 times less risky than Clearbridge Small. The mutual fund trades about -0.05 of its potential returns per unit of risk. The Clearbridge Small Cap is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 7,735 in Clearbridge Small Cap on September 12, 2024 and sell it today you would lose (9.00) from holding Clearbridge Small Cap or give up 0.12% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Small Cap Value vs. Clearbridge Small Cap
Performance |
| Timeline |
| Small Cap Value |
| Clearbridge Small Cap |
Small Cap and Clearbridge Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Cap and Clearbridge Small
The main advantage of trading using opposite Small Cap and Clearbridge Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap position performs unexpectedly, Clearbridge Small 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 Small will offset losses from the drop in Clearbridge Small's long position.| Small Cap vs. Cmg Ultra Short | Small Cap vs. Prudential Short Duration | Small Cap vs. Easterly Snow Longshort | Small Cap vs. Aqr Long Short Equity |
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Check out your portfolio center.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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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