Correlation Between Clearbridge Value and Western Asset

Can any of the company-specific risk be diversified away by investing in both Clearbridge Value 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 Value 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 Value Trust and Western Asset E, you can compare the effects of market volatilities on Clearbridge Value 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 Value with a short position of Western Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Clearbridge Value and Western Asset.

Diversification Opportunities for Clearbridge Value and Western Asset

-0.77

Correlation Coefficient

Clearbridge Value  Western Asset

Pay attention - limited upside

The 3 months correlation between Clearbridge and Western is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Clearbridge Value Trust and Western Asset E in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset E and Clearbridge Value 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 Value Trust 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 E has no effect on the direction of Clearbridge Value i.e., Clearbridge Value and Western Asset go up and down completely randomly.

Pair Corralation between Clearbridge Value and Western Asset

Assuming the 90 days horizon Clearbridge Value Trust is expected to generate 2.34 times more return on investment than Western Asset. However, Clearbridge Value is 2.34 times more volatile than Western Asset E. It trades about 0.24 of its potential returns per unit of risk. Western Asset E is currently generating about -0.08 per unit of risk. If you would invest  9,973  in Clearbridge Value Trust on September 3, 2024 and sell it today you would earn a total of  1,230  from holding Clearbridge Value Trust or generate 12.33% return on investment over 90 days.

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

Clearbridge Value Trust  vs.  Western Asset E

Clearbridge Value Trust

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Clearbridge Value Trust are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Clearbridge Value may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Western Asset E

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Western Asset E has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Western Asset is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Clearbridge Value and Western Asset

The main advantage of trading using opposite Clearbridge Value and Western Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Clearbridge Value 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 Value Trust and Western Asset E 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.