Correlation Between Ford and Lord Abbett
Can any of the company-specific risk be diversified away by investing in both Ford 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 Ford and Lord Abbett into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Lord Abbett Developing, you can compare the effects of market volatilities on Ford 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 Ford with a short position of Lord Abbett. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Lord Abbett.
Diversification Opportunities for Ford and Lord Abbett
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Ford and Lord is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Lord Abbett Developing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lord Abbett Developing and Ford 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 Ford Motor 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 Developing has no effect on the direction of Ford i.e., Ford and Lord Abbett go up and down completely randomly.
Pair Corralation between Ford and Lord Abbett
Taking into account the 90-day investment horizon Ford Motor is expected to generate 1.15 times more return on investment than Lord Abbett. However, Ford is 1.15 times more volatile than Lord Abbett Developing. It trades about 0.25 of its potential returns per unit of risk. Lord Abbett Developing is currently generating about 0.23 per unit of risk. If you would invest 1,008 in Ford Motor on September 2, 2024 and sell it today you would earn a total of 105.00 from holding Ford Motor or generate 10.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Lord Abbett Developing
Performance |
| Timeline |
| Ford Motor |
| Lord Abbett Developing |
Ford and Lord Abbett Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Lord Abbett
The main advantage of trading using opposite Ford and Lord Abbett positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford 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.The idea behind Ford Motor and Lord Abbett Developing 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.| Lord Abbett vs. T Rowe Price | Lord Abbett vs. Baird Midcap Fund | Lord Abbett vs. Invesco Small Cap | Lord Abbett vs. Capital World Growth |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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