Correlation Between Lord Abbett and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Lord Abbett and Dow Jones 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 Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lord Abbett Micro Cap and Dow Jones Industrial, you can compare the effects of market volatilities on Lord Abbett and Dow Jones 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 Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lord Abbett and Dow Jones.
Diversification Opportunities for Lord Abbett and Dow Jones
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Lord and Dow is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Lord Abbett Micro Cap and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial 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 Micro Cap are associated (or correlated) with Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of Lord Abbett i.e., Lord Abbett and Dow Jones go up and down completely randomly.
Pair Corralation between Lord Abbett and Dow Jones
Assuming the 90 days horizon Lord Abbett Micro Cap is expected to generate 1.92 times more return on investment than Dow Jones. However, Lord Abbett is 1.92 times more volatile than Dow Jones Industrial. It trades about 0.19 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.14 per unit of risk. If you would invest 1,974 in Lord Abbett Micro Cap on August 25, 2024 and sell it today you would earn a total of 271.00 from holding Lord Abbett Micro Cap or generate 13.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lord Abbett Micro Cap vs. Dow Jones Industrial
Performance |
| Timeline |
Lord Abbett and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Lord Abbett Micro Cap
Pair trading matchups for Lord Abbett
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Lord Abbett and Dow Jones
The main advantage of trading using opposite Lord Abbett and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lord Abbett position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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