Correlation Between Clearbridge Aggressive and Franklin Mutual

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

Diversification Opportunities for Clearbridge Aggressive and Franklin Mutual

-0.61

Correlation Coefficient

Clearbridge Aggressive  Franklin Mutual

Excellent diversification

The 3 months correlation between Clearbridge and Franklin is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Clearbridge Aggressive Growth and Franklin Mutual European in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Mutual European 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 Mutual. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Mutual European has no effect on the direction of Clearbridge Aggressive i.e., Clearbridge Aggressive and Franklin Mutual go up and down completely randomly.

Pair Corralation between Clearbridge Aggressive and Franklin Mutual

Assuming the 90 days horizon Clearbridge Aggressive Growth is expected to generate 1.18 times more return on investment than Franklin Mutual. However, Clearbridge Aggressive is 1.18 times more volatile than Franklin Mutual European. It trades about 0.2 of its potential returns per unit of risk. Franklin Mutual European is currently generating about -0.03 per unit of risk. If you would invest  14,155  in Clearbridge Aggressive Growth on September 13, 2024 and sell it today you would earn a total of  1,727  from holding Clearbridge Aggressive Growth or generate 12.2% return on investment over 90 days.

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

Clearbridge Aggressive Growth  vs.  Franklin Mutual European

Clearbridge Aggressive

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Clearbridge Aggressive Growth are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Clearbridge Aggressive may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Franklin Mutual European

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Franklin Mutual European has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Franklin Mutual 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 Aggressive and Franklin Mutual

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

The idea behind Clearbridge Aggressive Growth and Franklin Mutual European 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.