Correlation Between World Energy and L Abbett
Can any of the company-specific risk be diversified away by investing in both World Energy and L Abbett 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 World Energy and L Abbett into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between World Energy Fund and L Abbett Growth, you can compare the effects of market volatilities on World Energy and L Abbett 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 World Energy with a short position of L Abbett. Check out your portfolio center. Please also check ongoing floating volatility patterns of World Energy and L Abbett.
Diversification Opportunities for World Energy and L Abbett
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between World and LGLSX is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding World Energy Fund and L Abbett Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on L Abbett Growth and World Energy 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 World Energy Fund are associated (or correlated) with L Abbett. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of L Abbett Growth has no effect on the direction of World Energy i.e., World Energy and L Abbett go up and down completely randomly.
Pair Corralation between World Energy and L Abbett
Assuming the 90 days horizon World Energy is expected to generate 1.1 times less return on investment than L Abbett. But when comparing it to its historical volatility, World Energy Fund is 1.2 times less risky than L Abbett. It trades about 0.36 of its potential returns per unit of risk. L Abbett Growth is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest 4,300 in L Abbett Growth on August 24, 2024 and sell it today you would earn a total of 438.00 from holding L Abbett Growth or generate 10.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
World Energy Fund vs. L Abbett Growth
Performance |
| Timeline |
| World Energy |
| L Abbett Growth |
World Energy and L Abbett Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with World Energy and L Abbett
The main advantage of trading using opposite World Energy and L Abbett positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if World Energy position performs unexpectedly, L Abbett 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 L Abbett will offset losses from the drop in L Abbett's long position.| World Energy vs. Vanguard Energy Fund | World Energy vs. Vanguard Energy Index | World Energy vs. Fidelity Select Portfolios | World Energy vs. Fidelity Advisor Energy |
| L Abbett vs. Wisdomtree Siegel Global | L Abbett vs. Ab Global Bond | L Abbett vs. Ab Global Risk | L Abbett vs. Kinetics Global Fund |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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