Correlation Between ABL and LAMB
Can any of the company-specific risk be diversified away by investing in both ABL and LAMB 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 ABL and LAMB into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ABL and LAMB, you can compare the effects of market volatilities on ABL and LAMB 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 ABL with a short position of LAMB. Check out your portfolio center. Please also check ongoing floating volatility patterns of ABL and LAMB.
Diversification Opportunities for ABL and LAMB
Excellent diversification
The 3 months correlation between ABL and LAMB is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding ABL and LAMB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LAMB and ABL 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 ABL are associated (or correlated) with LAMB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LAMB has no effect on the direction of ABL i.e., ABL and LAMB go up and down completely randomly.
Pair Corralation between ABL and LAMB
If you would invest 1.58 in ABL on August 25, 2024 and sell it today you would earn a total of 0.00 from holding ABL or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 4.55% |
| Values | Daily Returns |
ABL vs. LAMB
Performance |
| Timeline |
| ABL |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| LAMB |
ABL and LAMB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ABL and LAMB
The main advantage of trading using opposite ABL and LAMB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ABL position performs unexpectedly, LAMB 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 LAMB will offset losses from the drop in LAMB's long position.The idea behind ABL and LAMB 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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