Correlation Between Bank of America and Lord Abbett
Can any of the company-specific risk be diversified away by investing in both Bank of America and Lord 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 Bank of America and Lord Abbett into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bank of America and Lord Abbett Focused, you can compare the effects of market volatilities on Bank of America and Lord 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 Bank of America with a short position of Lord Abbett. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Lord Abbett.
Diversification Opportunities for Bank of America and Lord Abbett
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Bank and Lord is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Lord Abbett Focused in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lord Abbett Focused and Bank of America 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 Bank of America are associated (or correlated) with Lord Abbett. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lord Abbett Focused has no effect on the direction of Bank of America i.e., Bank of America and Lord Abbett go up and down completely randomly.
Pair Corralation between Bank of America and Lord Abbett
Considering the 90-day investment horizon Bank of America is expected to generate 1.13 times more return on investment than Lord Abbett. However, Bank of America is 1.13 times more volatile than Lord Abbett Focused. It trades about 0.12 of its potential returns per unit of risk. Lord Abbett Focused is currently generating about 0.05 per unit of risk. If you would invest 3,495 in Bank of America on September 1, 2024 and sell it today you would earn a total of 1,256 from holding Bank of America or generate 35.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.47% |
| Values | Daily Returns |
Bank of America vs. Lord Abbett Focused
Performance |
| Timeline |
| Bank of America |
| Lord Abbett Focused |
Bank of America and Lord Abbett Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Lord Abbett
The main advantage of trading using opposite Bank of America and Lord Abbett positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Lord 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 Lord Abbett will offset losses from the drop in Lord Abbett's long position.| Bank of America vs. Citigroup | Bank of America vs. Nu Holdings | Bank of America vs. HSBC Holdings PLC | Bank of America vs. Bank of Montreal |
| Lord Abbett vs. Lord Abbett Trust | Lord Abbett vs. Lord Abbett Trust | Lord Abbett vs. Lord Abbett Focused | Lord Abbett vs. Floating Rate 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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