Correlation Between High Income and Lord Abbett
Can any of the company-specific risk be diversified away by investing in both High Income 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 High Income and Lord Abbett into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between High Income Fund and Lord Abbett Diversified, you can compare the effects of market volatilities on High Income 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 High Income with a short position of Lord Abbett. Check out your portfolio center. Please also check ongoing floating volatility patterns of High Income and Lord Abbett.
Diversification Opportunities for High Income and Lord Abbett
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between High and Lord is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding High Income Fund and Lord Abbett Diversified in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lord Abbett Diversified and High Income 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 High Income 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 Diversified has no effect on the direction of High Income i.e., High Income and Lord Abbett go up and down completely randomly.
Pair Corralation between High Income and Lord Abbett
Assuming the 90 days horizon High Income is expected to generate 1.85 times less return on investment than Lord Abbett. But when comparing it to its historical volatility, High Income Fund is 1.98 times less risky than Lord Abbett. It trades about 0.18 of its potential returns per unit of risk. Lord Abbett Diversified is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 1,600 in Lord Abbett Diversified on September 3, 2024 and sell it today you would earn a total of 52.00 from holding Lord Abbett Diversified or generate 3.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
High Income Fund vs. Lord Abbett Diversified
Performance |
| Timeline |
| High Income Fund |
| Lord Abbett Diversified |
High Income and Lord Abbett Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with High Income and Lord Abbett
The main advantage of trading using opposite High Income and Lord Abbett positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if High Income 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.| High Income vs. Lord Abbett Diversified | High Income vs. Massmutual Premier Diversified | High Income vs. Oppenheimer International Diversified | High Income vs. Massmutual Select Diversified |
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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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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