Correlation Between Lord Abbett and Limited Duration

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

Diversification Opportunities for Lord Abbett and Limited Duration

0.72
  Correlation Coefficient

Poor diversification

The 3 months correlation between Lord and Limited is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Lord Abbett Short and Limited Duration Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Limited Duration 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 Short are associated (or correlated) with Limited Duration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Limited Duration has no effect on the direction of Lord Abbett i.e., Lord Abbett and Limited Duration go up and down completely randomly.

Pair Corralation between Lord Abbett and Limited Duration

Assuming the 90 days horizon Lord Abbett is expected to generate 2.51 times less return on investment than Limited Duration. But when comparing it to its historical volatility, Lord Abbett Short is 1.93 times less risky than Limited Duration. It trades about 0.22 of its potential returns per unit of risk. Limited Duration Fund is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  923.00  in Limited Duration Fund on September 12, 2024 and sell it today you would earn a total of  6.00  from holding Limited Duration Fund or generate 0.65% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Lord Abbett Short  vs.  Limited Duration Fund

 Performance 
       Timeline  
Lord Abbett Short 

Risk-Adjusted Performance

2 of 100

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

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Limited Duration Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Limited Duration is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Lord Abbett and Limited Duration Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Lord Abbett and Limited Duration

The main advantage of trading using opposite Lord Abbett and Limited Duration positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lord Abbett position performs unexpectedly, Limited Duration 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 Limited Duration will offset losses from the drop in Limited Duration's long position.
The idea behind Lord Abbett Short and Limited Duration 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 Global Correlations module to find global opportunities by holding instruments from different markets.

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