Correlation Between Clearbridge Aggressive and Franklin Small
Can any of the company-specific risk be diversified away by investing in both Clearbridge Aggressive and Franklin 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 Clearbridge Aggressive and Franklin Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Clearbridge Aggressive Growth and Franklin Small Cap, you can compare the effects of market volatilities on Clearbridge Aggressive and Franklin 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 Clearbridge Aggressive with a short position of Franklin Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Clearbridge Aggressive and Franklin Small.
Diversification Opportunities for Clearbridge Aggressive and Franklin Small
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Clearbridge and Franklin is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Clearbridge Aggressive Growth and Franklin Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Small Cap and Clearbridge Aggressive 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 Aggressive Growth are associated (or correlated) with Franklin Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Small Cap has no effect on the direction of Clearbridge Aggressive i.e., Clearbridge Aggressive and Franklin Small go up and down completely randomly.
Pair Corralation between Clearbridge Aggressive and Franklin Small
Assuming the 90 days horizon Clearbridge Aggressive is expected to generate 1.18 times less return on investment than Franklin Small. But when comparing it to its historical volatility, Clearbridge Aggressive Growth is 1.58 times less risky than Franklin Small. It trades about 0.27 of its potential returns per unit of risk. Franklin Small Cap is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 6,028 in Franklin Small Cap on August 29, 2024 and sell it today you would earn a total of 484.00 from holding Franklin Small Cap or generate 8.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Clearbridge Aggressive Growth vs. Franklin Small Cap
Performance |
| Timeline |
| Clearbridge Aggressive |
| Franklin Small Cap |
Clearbridge Aggressive and Franklin Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Clearbridge Aggressive and Franklin Small
The main advantage of trading using opposite Clearbridge Aggressive and Franklin Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Clearbridge Aggressive position performs unexpectedly, Franklin 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 Franklin Small will offset losses from the drop in Franklin Small's long position.The idea behind Clearbridge Aggressive Growth and Franklin 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.
| Franklin Small vs. Franklin Rising Dividends | Franklin Small vs. Franklin Mutual Global | Franklin Small vs. Franklin Mutual Shares | Franklin Small vs. Franklin Growth Fund |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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