Correlation Between Clearbridge Dividend and Western Asset

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

Diversification Opportunities for Clearbridge Dividend and Western Asset

-0.34

Correlation Coefficient

Clearbridge Dividend  Western Asset

Very good diversification

The 3 months correlation between Clearbridge and WESTERN is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Clearbridge Dividend Strategy and Western Asset Total in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset Total and Clearbridge Dividend 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 Dividend Strategy 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 Total has no effect on the direction of Clearbridge Dividend i.e., Clearbridge Dividend and Western Asset go up and down completely randomly.

Pair Corralation between Clearbridge Dividend and Western Asset

Assuming the 90 days horizon Clearbridge Dividend Strategy is expected to generate 3.25 times more return on investment than Western Asset. However, Clearbridge Dividend is 3.25 times more volatile than Western Asset Total. It trades about 0.19 of its potential returns per unit of risk. Western Asset Total is currently generating about 0.08 per unit of risk. If you would invest  3,030  in Clearbridge Dividend Strategy on September 3, 2024 and sell it today you would earn a total of  232.00  from holding Clearbridge Dividend Strategy or generate 7.66% return on investment over 90 days.

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

Clearbridge Dividend Strategy  vs.  Western Asset Total

Clearbridge Dividend

Risk-Adjusted Performance

15 of 100

Good

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

Western Asset Total

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Western Asset Total are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward 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 Dividend and Western Asset

The main advantage of trading using opposite Clearbridge Dividend and Western Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Clearbridge Dividend 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 Dividend Strategy and Western Asset Total 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.