Correlation Between Lord Abbett and Smallcap
Can any of the company-specific risk be diversified away by investing in both Lord Abbett and Smallcap 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 Smallcap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lord Abbett Health and Smallcap Sp 600, you can compare the effects of market volatilities on Lord Abbett and Smallcap 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 Smallcap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lord Abbett and Smallcap.
Diversification Opportunities for Lord Abbett and Smallcap
-0.09 | Correlation Coefficient |
Good diversification
The 3 months correlation between Lord and Smallcap is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Lord Abbett Health and Smallcap Sp 600 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smallcap Sp 600 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 Health are associated (or correlated) with Smallcap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smallcap Sp 600 has no effect on the direction of Lord Abbett i.e., Lord Abbett and Smallcap go up and down completely randomly.
Pair Corralation between Lord Abbett and Smallcap
Assuming the 90 days horizon Lord Abbett is expected to generate 3.18 times less return on investment than Smallcap. But when comparing it to its historical volatility, Lord Abbett Health is 1.49 times less risky than Smallcap. It trades about 0.14 of its potential returns per unit of risk. Smallcap Sp 600 is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest 2,887 in Smallcap Sp 600 on September 2, 2024 and sell it today you would earn a total of 269.00 from holding Smallcap Sp 600 or generate 9.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 85.71% |
| Values | Daily Returns |
Lord Abbett Health vs. Smallcap Sp 600
Performance |
| Timeline |
| Lord Abbett Health |
| Smallcap Sp 600 |
Lord Abbett and Smallcap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lord Abbett and Smallcap
The main advantage of trading using opposite Lord Abbett and Smallcap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lord Abbett position performs unexpectedly, Smallcap 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 Smallcap will offset losses from the drop in Smallcap's long position.| Lord Abbett vs. Lord Abbett Trust | Lord Abbett vs. Lord Abbett Trust | Lord Abbett vs. Lord Abbett Focused | Lord Abbett vs. Floating Rate Fund |
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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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