Correlation Between Pace High and Clearbridge Small

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Can any of the company-specific risk be diversified away by investing in both Pace High 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 Pace High and Clearbridge Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pace High Yield and Clearbridge Small Cap, you can compare the effects of market volatilities on Pace High 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 Pace High with a short position of Clearbridge Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pace High and Clearbridge Small.

Diversification Opportunities for Pace High and Clearbridge Small

0.9
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Pace and Clearbridge is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Pace High Yield 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 Pace High 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 Pace High Yield 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 Pace High i.e., Pace High and Clearbridge Small go up and down completely randomly.

Pair Corralation between Pace High and Clearbridge Small

Assuming the 90 days horizon Pace High is expected to generate 1.37 times less return on investment than Clearbridge Small. But when comparing it to its historical volatility, Pace High Yield is 7.82 times less risky than Clearbridge Small. It trades about 0.25 of its potential returns per unit of risk. Clearbridge Small Cap is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  3,335  in Clearbridge Small Cap on September 14, 2024 and sell it today you would earn a total of  408.00  from holding Clearbridge Small Cap or generate 12.23% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Pace High Yield  vs.  Clearbridge Small Cap

 Performance 
       Timeline  
Pace High Yield 

Risk-Adjusted Performance

23 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Pace High Yield are ranked lower than 23 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Pace High is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Clearbridge Small Cap 

Risk-Adjusted Performance

12 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Clearbridge Small Cap are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Clearbridge Small may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pace High and Clearbridge Small Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Pace High and Clearbridge Small

The main advantage of trading using opposite Pace High and Clearbridge Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pace High 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.
The idea behind Pace High Yield and Clearbridge Small Cap 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.

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