Correlation Between American Funds and Lord Abbett
Can any of the company-specific risk be diversified away by investing in both American Funds 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 American Funds and Lord Abbett into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds 2050 and Lord Abbett Inflation, you can compare the effects of market volatilities on American Funds 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 American Funds with a short position of Lord Abbett. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Lord Abbett.
Diversification Opportunities for American Funds and Lord Abbett
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between American and Lord is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding American Funds 2050 and Lord Abbett Inflation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lord Abbett Inflation and American Funds 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 American Funds 2050 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 Inflation has no effect on the direction of American Funds i.e., American Funds and Lord Abbett go up and down completely randomly.
Pair Corralation between American Funds and Lord Abbett
Assuming the 90 days horizon American Funds 2050 is expected to generate 3.22 times more return on investment than Lord Abbett. However, American Funds is 3.22 times more volatile than Lord Abbett Inflation. It trades about 0.1 of its potential returns per unit of risk. Lord Abbett Inflation is currently generating about 0.08 per unit of risk. If you would invest 1,604 in American Funds 2050 on September 3, 2024 and sell it today you would earn a total of 610.00 from holding American Funds 2050 or generate 38.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Funds 2050 vs. Lord Abbett Inflation
Performance |
| Timeline |
| American Funds 2050 |
| Lord Abbett Inflation |
American Funds and Lord Abbett Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Lord Abbett
The main advantage of trading using opposite American Funds and Lord Abbett positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds 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.| American Funds vs. Lord Abbett Inflation | American Funds vs. Inflation Protected Bond Fund | American Funds vs. Ab Bond Inflation | American Funds vs. Ab Bond Inflation |
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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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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