Correlation Between Lord Abbett and Small Cap
Can any of the company-specific risk be diversified away by investing in both Lord Abbett and Small Cap 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 Lord Abbett and Small Cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lord Abbett Govt and Small Cap Special, you can compare the effects of market volatilities on Lord Abbett and Small Cap 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 Lord Abbett with a short position of Small Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lord Abbett and Small Cap.
Diversification Opportunities for Lord Abbett and Small Cap
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Lord and Small is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Lord Abbett Govt and Small Cap Special in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Special and Lord Abbett 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 Lord Abbett Govt are associated (or correlated) with Small Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Cap Special has no effect on the direction of Lord Abbett i.e., Lord Abbett and Small Cap go up and down completely randomly.
Pair Corralation between Lord Abbett and Small Cap
Assuming the 90 days horizon Lord Abbett is expected to generate 4.51 times less return on investment than Small Cap. But when comparing it to its historical volatility, Lord Abbett Govt is 2.33 times less risky than Small Cap. It trades about 0.04 of its potential returns per unit of risk. Small Cap Special is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 985.00 in Small Cap Special on August 31, 2024 and sell it today you would earn a total of 366.00 from holding Small Cap Special or generate 37.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 98.01% |
| Values | Daily Returns |
Lord Abbett Govt vs. Small Cap Special
Performance |
| Timeline |
| Lord Abbett Govt |
| Small Cap Special |
Lord Abbett and Small Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lord Abbett and Small Cap
The main advantage of trading using opposite Lord Abbett and Small Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lord Abbett position performs unexpectedly, Small Cap 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 Small Cap will offset losses from the drop in Small Cap's long position.| Lord Abbett vs. Vanguard Total Stock | Lord Abbett vs. Vanguard 500 Index | Lord Abbett vs. Vanguard Total Stock | Lord Abbett vs. Vanguard Total Stock |
| Small Cap vs. Dws Government Money | Small Cap vs. Lord Abbett Govt | Small Cap vs. Meeder Funds | Small Cap vs. T Rowe Price |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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