Correlation Between Clearbridge Appreciation and Western Asset
Can any of the company-specific risk be diversified away by investing in both Clearbridge Appreciation and Western Asset 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 Appreciation and Western Asset into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Clearbridge Appreciation Fund and Western Asset Smash, you can compare the effects of market volatilities on Clearbridge Appreciation and Western Asset 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 Appreciation with a short position of Western Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Clearbridge Appreciation and Western Asset.
Diversification Opportunities for Clearbridge Appreciation and Western Asset
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Clearbridge and Western is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Clearbridge Appreciation Fund and Western Asset Smash in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset Smash and Clearbridge Appreciation 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 Appreciation Fund are associated (or correlated) with Western Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Asset Smash has no effect on the direction of Clearbridge Appreciation i.e., Clearbridge Appreciation and Western Asset go up and down completely randomly.
Pair Corralation between Clearbridge Appreciation and Western Asset
Assuming the 90 days horizon Clearbridge Appreciation Fund is expected to under-perform the Western Asset. But the mutual fund apears to be less risky and, when comparing its historical volatility, Clearbridge Appreciation Fund is 1.51 times less risky than Western Asset. The mutual fund trades about -0.1 of its potential returns per unit of risk. The Western Asset Smash is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 868.00 in Western Asset Smash on November 29, 2024 and sell it today you would earn a total of 30.00 from holding Western Asset Smash or generate 3.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Clearbridge Appreciation Fund vs. Western Asset Smash
Performance |
| Timeline |
| Clearbridge Appreciation |
| Western Asset Smash |
Clearbridge Appreciation and Western Asset Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Clearbridge Appreciation and Western Asset
The main advantage of trading using opposite Clearbridge Appreciation and Western Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Clearbridge Appreciation position performs unexpectedly, Western Asset 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 Western Asset will offset losses from the drop in Western Asset's long position.The idea behind Clearbridge Appreciation Fund and Western Asset Smash 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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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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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