Correlation Between Federated Government and Lord Abbett
Can any of the company-specific risk be diversified away by investing in both Federated Government 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 Federated Government and Lord Abbett into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Federated Government Ultrashort and Lord Abbett Alpha, you can compare the effects of market volatilities on Federated Government 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 Federated Government with a short position of Lord Abbett. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated Government and Lord Abbett.
Diversification Opportunities for Federated Government and Lord Abbett
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Federated and Lord is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Federated Government Ultrashor and Lord Abbett Alpha in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lord Abbett Alpha and Federated Government 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 Federated Government Ultrashort 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 Alpha has no effect on the direction of Federated Government i.e., Federated Government and Lord Abbett go up and down completely randomly.
Pair Corralation between Federated Government and Lord Abbett
Assuming the 90 days horizon Federated Government is expected to generate 73.45 times less return on investment than Lord Abbett. But when comparing it to its historical volatility, Federated Government Ultrashort is 30.62 times less risky than Lord Abbett. It trades about 0.12 of its potential returns per unit of risk. Lord Abbett Alpha is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest 2,704 in Lord Abbett Alpha on September 1, 2024 and sell it today you would earn a total of 218.00 from holding Lord Abbett Alpha or generate 8.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Federated Government Ultrashor vs. Lord Abbett Alpha
Performance |
| Timeline |
| Federated Government |
| Lord Abbett Alpha |
Federated Government and Lord Abbett Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federated Government and Lord Abbett
The main advantage of trading using opposite Federated Government and Lord Abbett positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federated Government 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.| Federated Government vs. Federated Emerging Market | Federated Government vs. Federated Mdt All | Federated Government vs. Federated Mdt Balanced | Federated Government vs. Federated Global Allocation |
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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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