Correlation Between L Abbett and Arbitrage Fund

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Can any of the company-specific risk be diversified away by investing in both L Abbett and Arbitrage Fund 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 L Abbett and Arbitrage Fund into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between L Abbett Growth and The Arbitrage Fund, you can compare the effects of market volatilities on L Abbett and Arbitrage Fund 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 L Abbett with a short position of Arbitrage Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of L Abbett and Arbitrage Fund.

Diversification Opportunities for L Abbett and Arbitrage Fund

0.46
  Correlation Coefficient

Very weak diversification

The 3 months correlation between LGLSX and Arbitrage is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding L Abbett Growth and The Arbitrage Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arbitrage Fund and L 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 L Abbett Growth are associated (or correlated) with Arbitrage Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arbitrage Fund has no effect on the direction of L Abbett i.e., L Abbett and Arbitrage Fund go up and down completely randomly.

Pair Corralation between L Abbett and Arbitrage Fund

Assuming the 90 days horizon L Abbett Growth is expected to generate 5.58 times more return on investment than Arbitrage Fund. However, L Abbett is 5.58 times more volatile than The Arbitrage Fund. It trades about 0.11 of its potential returns per unit of risk. The Arbitrage Fund is currently generating about 0.06 per unit of risk. If you would invest  2,473  in L Abbett Growth on September 12, 2024 and sell it today you would earn a total of  2,391  from holding L Abbett Growth or generate 96.68% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

L Abbett Growth  vs.  The Arbitrage Fund

 Performance 
       Timeline  
L Abbett Growth 

Risk-Adjusted Performance

22 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in L Abbett Growth are ranked lower than 22 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, L Abbett showed solid returns over the last few months and may actually be approaching a breakup point.
Arbitrage Fund 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in The Arbitrage Fund are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Arbitrage Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

L Abbett and Arbitrage Fund Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with L Abbett and Arbitrage Fund

The main advantage of trading using opposite L Abbett and Arbitrage Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if L Abbett position performs unexpectedly, Arbitrage Fund 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 Arbitrage Fund will offset losses from the drop in Arbitrage Fund's long position.
The idea behind L Abbett Growth and The Arbitrage Fund pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.

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