Correlation Between Health Care and Lord Abbett
Can any of the company-specific risk be diversified away by investing in both Health Care 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 Health Care and Lord Abbett into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Health Care Ultrasector and Lord Abbett Small, you can compare the effects of market volatilities on Health Care 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 Health Care with a short position of Lord Abbett. Check out your portfolio center. Please also check ongoing floating volatility patterns of Health Care and Lord Abbett.
Diversification Opportunities for Health Care and Lord Abbett
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Health and Lord is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Health Care Ultrasector and Lord Abbett Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lord Abbett Small and Health Care 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 Health Care Ultrasector 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 Small has no effect on the direction of Health Care i.e., Health Care and Lord Abbett go up and down completely randomly.
Pair Corralation between Health Care and Lord Abbett
Assuming the 90 days horizon Health Care Ultrasector is expected to generate 0.59 times more return on investment than Lord Abbett. However, Health Care Ultrasector is 1.69 times less risky than Lord Abbett. It trades about -0.15 of its potential returns per unit of risk. Lord Abbett Small is currently generating about -0.32 per unit of risk. If you would invest 10,546 in Health Care Ultrasector on October 11, 2024 and sell it today you would lose (445.00) from holding Health Care Ultrasector or give up 4.22% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
Health Care Ultrasector vs. Lord Abbett Small
Performance |
| Timeline |
| Health Care Ultrasector |
| Lord Abbett Small |
Health Care and Lord Abbett Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Health Care and Lord Abbett
The main advantage of trading using opposite Health Care and Lord Abbett positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Health Care 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.| Health Care vs. Rational Strategic Allocation | Health Care vs. Barings Global Floating | Health Care vs. Federated Global Allocation | Health Care vs. Mirova Global Green |
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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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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