Correlation Between Lord Abbett and Health Care
Can any of the company-specific risk be diversified away by investing in both Lord Abbett and Health Care 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 Health Care 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 Health Care Fund, you can compare the effects of market volatilities on Lord Abbett and Health Care 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 Health Care. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lord Abbett and Health Care.
Diversification Opportunities for Lord Abbett and Health Care
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Lord and Health is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Lord Abbett Health and Health Care Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Health Care Fund 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 Health Care. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Health Care Fund has no effect on the direction of Lord Abbett i.e., Lord Abbett and Health Care go up and down completely randomly.
Pair Corralation between Lord Abbett and Health Care
Assuming the 90 days horizon Lord Abbett Health is expected to generate 1.42 times more return on investment than Health Care. However, Lord Abbett is 1.42 times more volatile than Health Care Fund. It trades about 0.07 of its potential returns per unit of risk. Health Care Fund is currently generating about 0.04 per unit of risk. If you would invest 1,813 in Lord Abbett Health on August 29, 2024 and sell it today you would earn a total of 167.00 from holding Lord Abbett Health or generate 9.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lord Abbett Health vs. Health Care Fund
Performance |
| Timeline |
| Lord Abbett Health |
| Health Care Fund |
Lord Abbett and Health Care Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lord Abbett and Health Care
The main advantage of trading using opposite Lord Abbett and Health Care positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lord Abbett position performs unexpectedly, Health Care 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 Health Care will offset losses from the drop in Health Care's long position.| Lord Abbett vs. Fidelity Advisor Technology | Lord Abbett vs. Fidelity Advisor Biotechnology | Lord Abbett vs. Fidelity Advisor Financial | Lord Abbett vs. Fidelity Advisor Utilities |
| Health Care vs. Fidelity Advisor Technology | Health Care vs. Fidelity Advisor Biotechnology | Health Care vs. Fidelity Advisor Financial | Health Care vs. Fidelity Advisor Utilities |
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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