Correlation Between Rational Defensive and Clearbridge Energy

Can any of the company-specific risk be diversified away by investing in both Rational Defensive and Clearbridge Energy 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 Rational Defensive and Clearbridge Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Rational Defensive Growth and Clearbridge Energy Mlp, you can compare the effects of market volatilities on Rational Defensive and Clearbridge Energy 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 Rational Defensive with a short position of Clearbridge Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rational Defensive and Clearbridge Energy.

Diversification Opportunities for Rational Defensive and Clearbridge Energy

0.84

Correlation Coefficient

Rational Defensive  Clearbridge Energy

Very poor diversification

The 3 months correlation between Rational and Clearbridge is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Rational Defensive Growth and Clearbridge Energy Mlp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clearbridge Energy Mlp and Rational Defensive 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 Rational Defensive Growth are associated (or correlated) with Clearbridge Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clearbridge Energy Mlp has no effect on the direction of Rational Defensive i.e., Rational Defensive and Clearbridge Energy go up and down completely randomly.

Pair Corralation between Rational Defensive and Clearbridge Energy

Assuming the 90 days horizon Rational Defensive is expected to generate 1.16 times less return on investment than Clearbridge Energy. But when comparing it to its historical volatility, Rational Defensive Growth is 1.18 times less risky than Clearbridge Energy. It trades about 0.26 of its potential returns per unit of risk. Clearbridge Energy Mlp is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  4,738  in Clearbridge Energy Mlp on September 5, 2024 and sell it today you would earn a total of  844.00  from holding Clearbridge Energy Mlp or generate 17.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Rational Defensive Growth  vs.  Clearbridge Energy Mlp

Rational Defensive Growth

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Rational Defensive Growth are ranked lower than 20 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Rational Defensive showed solid returns over the last few months and may actually be approaching a breakup point.

Clearbridge Energy Mlp

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Clearbridge Energy Mlp are ranked lower than 19 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Clearbridge Energy showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Rational Defensive and Clearbridge Energy

The main advantage of trading using opposite Rational Defensive and Clearbridge Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rational Defensive position performs unexpectedly, Clearbridge Energy 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 Energy will offset losses from the drop in Clearbridge Energy's long position.

The idea behind Rational Defensive Growth and Clearbridge Energy Mlp 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.

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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.