Correlation Between Clearbridge Value and Royce Total

Can any of the company-specific risk be diversified away by investing in both Clearbridge Value and Royce Total 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 Royce Total 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 Royce Total Return, you can compare the effects of market volatilities on Clearbridge Value and Royce Total 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 Royce Total. Check out your portfolio center. Please also check ongoing floating volatility patterns of Clearbridge Value and Royce Total.

Diversification Opportunities for Clearbridge Value and Royce Total

0.8

Correlation Coefficient

Clearbridge Value  Royce Total

Very poor diversification

The 3 months correlation between Clearbridge and Royce is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Clearbridge Value Trust and Royce Total Return in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Royce Total Return 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 Royce Total. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Royce Total Return has no effect on the direction of Clearbridge Value i.e., Clearbridge Value and Royce Total go up and down completely randomly.

Pair Corralation between Clearbridge Value and Royce Total

Assuming the 90 days horizon Clearbridge Value Trust is expected to under-perform the Royce Total. But the mutual fund apears to be less risky and, when comparing its historical volatility, Clearbridge Value Trust is 1.12 times less risky than Royce Total. The mutual fund trades about -0.08 of its potential returns per unit of risk. The Royce Total Return is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  799.00  in Royce Total Return on September 25, 2024 and sell it today you would lose (12.00) from holding Royce Total Return or give up 1.5% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

Clearbridge Value Trust  vs.  Royce Total Return

Clearbridge Value Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Clearbridge Value Trust has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Royce Total Return

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Royce Total Return has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Royce Total 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 Royce Total

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

The idea behind Clearbridge Value Trust and Royce Total Return 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.