Correlation Between Mainstay Convertible and Lord Abbett
Can any of the company-specific risk be diversified away by investing in both Mainstay Convertible and Lord Abbett 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 Mainstay Convertible and Lord Abbett into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mainstay Vertible Fund and Lord Abbett Convertible, you can compare the effects of market volatilities on Mainstay Convertible and Lord Abbett 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 Mainstay Convertible with a short position of Lord Abbett. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mainstay Convertible and Lord Abbett.
Diversification Opportunities for Mainstay Convertible and Lord Abbett
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Mainstay and Lord is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Mainstay Vertible Fund and Lord Abbett Convertible in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lord Abbett Convertible and Mainstay Convertible 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 Mainstay Vertible Fund are associated (or correlated) with Lord Abbett. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lord Abbett Convertible has no effect on the direction of Mainstay Convertible i.e., Mainstay Convertible and Lord Abbett go up and down completely randomly.
Pair Corralation between Mainstay Convertible and Lord Abbett
Assuming the 90 days horizon Mainstay Convertible is expected to generate 1.26 times less return on investment than Lord Abbett. But when comparing it to its historical volatility, Mainstay Vertible Fund is 1.17 times less risky than Lord Abbett. It trades about 0.1 of its potential returns per unit of risk. Lord Abbett Convertible is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 1,210 in Lord Abbett Convertible on August 31, 2024 and sell it today you would earn a total of 283.00 from holding Lord Abbett Convertible or generate 23.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mainstay Vertible Fund vs. Lord Abbett Convertible
Performance |
| Timeline |
| Mainstay Convertible |
| Lord Abbett Convertible |
Mainstay Convertible and Lord Abbett Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mainstay Convertible and Lord Abbett
The main advantage of trading using opposite Mainstay Convertible and Lord Abbett positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mainstay Convertible position performs unexpectedly, Lord Abbett 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 Lord Abbett will offset losses from the drop in Lord Abbett's long position.The idea behind Mainstay Vertible Fund and Lord Abbett Convertible 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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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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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