Correlation Between Lord Abbett and Vanguard Small-cap
Can any of the company-specific risk be diversified away by investing in both Lord Abbett and Vanguard 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 Vanguard 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 Developing and Vanguard Small Cap Growth, you can compare the effects of market volatilities on Lord Abbett and Vanguard 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 Vanguard Small-cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lord Abbett and Vanguard Small-cap.
Diversification Opportunities for Lord Abbett and Vanguard Small-cap
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Lord and Vanguard is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Lord Abbett Developing and Vanguard Small Cap Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Small Cap 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 Developing are associated (or correlated) with Vanguard 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 Vanguard Small Cap has no effect on the direction of Lord Abbett i.e., Lord Abbett and Vanguard Small-cap go up and down completely randomly.
Pair Corralation between Lord Abbett and Vanguard Small-cap
Assuming the 90 days horizon Lord Abbett is expected to generate 1.26 times less return on investment than Vanguard Small-cap. In addition to that, Lord Abbett is 1.25 times more volatile than Vanguard Small Cap Growth. It trades about 0.05 of its total potential returns per unit of risk. Vanguard Small Cap Growth is currently generating about 0.08 per unit of volatility. If you would invest 8,832 in Vanguard Small Cap Growth on November 3, 2024 and sell it today you would earn a total of 1,428 from holding Vanguard Small Cap Growth or generate 16.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lord Abbett Developing vs. Vanguard Small Cap Growth
Performance |
| Timeline |
| Lord Abbett Developing |
| Vanguard Small Cap |
Lord Abbett and Vanguard Small-cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lord Abbett and Vanguard Small-cap
The main advantage of trading using opposite Lord Abbett and Vanguard Small-cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lord Abbett position performs unexpectedly, Vanguard 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 Vanguard Small-cap will offset losses from the drop in Vanguard Small-cap's long position.| Lord Abbett vs. T Rowe Price | Lord Abbett vs. Baird Midcap Fund | Lord Abbett vs. Invesco Small Cap | Lord Abbett vs. Capital World Growth |
| Vanguard Small-cap vs. Vanguard Mid Cap Growth | Vanguard Small-cap vs. Vanguard Small Cap Value | Vanguard Small-cap vs. Vanguard Growth Index | Vanguard Small-cap vs. Vanguard Mid Cap Value |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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