Correlation Between Dow Jones and Clearbridge Small
Can any of the company-specific risk be diversified away by investing in both Dow Jones 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 Dow Jones and Clearbridge Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and Clearbridge Small Cap, you can compare the effects of market volatilities on Dow Jones 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 Dow Jones with a short position of Clearbridge Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Clearbridge Small.
Diversification Opportunities for Dow Jones and Clearbridge Small
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Dow and Clearbridge is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial 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 Dow Jones 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 Dow Jones Industrial 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 Dow Jones i.e., Dow Jones and Clearbridge Small go up and down completely randomly.
Pair Corralation between Dow Jones and Clearbridge Small
Assuming the 90 days trading horizon Dow Jones is expected to generate 1.56 times less return on investment than Clearbridge Small. But when comparing it to its historical volatility, Dow Jones Industrial is 1.67 times less risky than Clearbridge Small. It trades about 0.37 of its potential returns per unit of risk. Clearbridge Small Cap is currently generating about 0.35 of returns per unit of risk over similar time horizon. If you would invest 3,598 in Clearbridge Small Cap on September 1, 2024 and sell it today you would earn a total of 428.00 from holding Clearbridge Small Cap or generate 11.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. Clearbridge Small Cap
Performance |
| Timeline |
Dow Jones and Clearbridge Small Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Clearbridge Small Cap
Pair trading matchups for Clearbridge Small
Pair Trading with Dow Jones and Clearbridge Small
The main advantage of trading using opposite Dow Jones and Clearbridge Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones 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.| Dow Jones vs. Catalyst Pharmaceuticals | Dow Jones vs. Sphere Entertainment Co | Dow Jones vs. National CineMedia | Dow Jones vs. Mink Therapeutics |
| Clearbridge Small vs. Pimco Funds | Clearbridge Small vs. Ashmore Emerging Markets | Clearbridge Small vs. John Hancock Money | Clearbridge Small vs. Transamerica Funds |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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