Correlation Between L Abbett and Westwood Quality
Can any of the company-specific risk be diversified away by investing in both L Abbett and Westwood Quality 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 Westwood Quality 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 Westwood Quality Smallcap, you can compare the effects of market volatilities on L Abbett and Westwood Quality 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 Westwood Quality. Check out your portfolio center. Please also check ongoing floating volatility patterns of L Abbett and Westwood Quality.
Diversification Opportunities for L Abbett and Westwood Quality
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between LGLSX and Westwood is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding L Abbett Growth and Westwood Quality Smallcap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westwood Quality Smallcap 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 Westwood Quality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Westwood Quality Smallcap has no effect on the direction of L Abbett i.e., L Abbett and Westwood Quality go up and down completely randomly.
Pair Corralation between L Abbett and Westwood Quality
Assuming the 90 days horizon L Abbett Growth is expected to generate 1.13 times more return on investment than Westwood Quality. However, L Abbett is 1.13 times more volatile than Westwood Quality Smallcap. It trades about 0.13 of its potential returns per unit of risk. Westwood Quality Smallcap is currently generating about 0.07 per unit of risk. If you would invest 3,185 in L Abbett Growth on September 4, 2024 and sell it today you would earn a total of 1,616 from holding L Abbett Growth or generate 50.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
L Abbett Growth vs. Westwood Quality Smallcap
Performance |
| Timeline |
| L Abbett Growth |
| Westwood Quality Smallcap |
L Abbett and Westwood Quality Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with L Abbett and Westwood Quality
The main advantage of trading using opposite L Abbett and Westwood Quality positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if L Abbett position performs unexpectedly, Westwood Quality 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 Westwood Quality will offset losses from the drop in Westwood Quality's long position.| L Abbett vs. Lord Abbett Trust | L Abbett vs. Lord Abbett Trust | L Abbett vs. Lord Abbett Focused | L Abbett vs. Floating Rate Fund |
| Westwood Quality vs. Dws Government Money | Westwood Quality vs. Elfun Government Money | Westwood Quality vs. Blackrock Exchange Portfolio | Westwood Quality vs. First American Funds |
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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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