Correlation Between Northern Small and Clearbridge Small
Can any of the company-specific risk be diversified away by investing in both Northern Small 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 Northern Small and Clearbridge Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northern Small Cap and Clearbridge Small Cap, you can compare the effects of market volatilities on Northern Small 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 Northern Small with a short position of Clearbridge Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Small and Clearbridge Small.
Diversification Opportunities for Northern Small and Clearbridge Small
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Northern and Clearbridge is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Northern Small Cap 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 Northern Small 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 Northern Small Cap 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 Northern Small i.e., Northern Small and Clearbridge Small go up and down completely randomly.
Pair Corralation between Northern Small and Clearbridge Small
Assuming the 90 days horizon Northern Small Cap is expected to under-perform the Clearbridge Small. But the mutual fund apears to be less risky and, when comparing its historical volatility, Northern Small Cap is 1.05 times less risky than Clearbridge Small. The mutual fund trades about -0.04 of its potential returns per unit of risk. The Clearbridge Small Cap is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 3,696 in Clearbridge Small Cap on September 13, 2024 and sell it today you would earn a total of 47.00 from holding Clearbridge Small Cap or generate 1.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Northern Small Cap vs. Clearbridge Small Cap
Performance |
| Timeline |
| Northern Small Cap |
| Clearbridge Small Cap |
Northern Small and Clearbridge Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northern Small and Clearbridge Small
The main advantage of trading using opposite Northern Small and Clearbridge Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Small 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.| Northern Small vs. Tekla Healthcare Opportunities | Northern Small vs. Eventide Healthcare Life | Northern Small vs. Baillie Gifford Health | Northern Small vs. Live Oak Health |
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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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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