Correlation Between Lord Abbett and Icon Information
Can any of the company-specific risk be diversified away by investing in both Lord Abbett and Icon Information 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 Icon Information into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lord Abbett Convertible and Icon Information Technology, you can compare the effects of market volatilities on Lord Abbett and Icon Information 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 Icon Information. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lord Abbett and Icon Information.
Diversification Opportunities for Lord Abbett and Icon Information
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Lord and Icon is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Lord Abbett Convertible and Icon Information Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Icon Information Tec 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 Convertible are associated (or correlated) with Icon Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Icon Information Tec has no effect on the direction of Lord Abbett i.e., Lord Abbett and Icon Information go up and down completely randomly.
Pair Corralation between Lord Abbett and Icon Information
Assuming the 90 days horizon Lord Abbett Convertible is expected to generate 0.55 times more return on investment than Icon Information. However, Lord Abbett Convertible is 1.83 times less risky than Icon Information. It trades about 0.07 of its potential returns per unit of risk. Icon Information Technology is currently generating about 0.01 per unit of risk. If you would invest 1,177 in Lord Abbett Convertible on December 5, 2024 and sell it today you would earn a total of 252.00 from holding Lord Abbett Convertible or generate 21.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lord Abbett Convertible vs. Icon Information Technology
Performance |
| Timeline |
| Lord Abbett Convertible |
| Icon Information Tec |
Lord Abbett and Icon Information Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lord Abbett and Icon Information
The main advantage of trading using opposite Lord Abbett and Icon Information positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lord Abbett position performs unexpectedly, Icon Information 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 Icon Information will offset losses from the drop in Icon Information's long position.| Lord Abbett vs. Barings Active Short | ||
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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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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