Correlation Between Health Care and Lord Abbett
Can any of the company-specific risk be diversified away by investing in both Health Care 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 Health Care and Lord Abbett into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Health Care Fund and Lord Abbett Health, you can compare the effects of market volatilities on Health Care 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 Health Care with a short position of Lord Abbett. Check out your portfolio center. Please also check ongoing floating volatility patterns of Health Care and Lord Abbett.
Diversification Opportunities for Health Care and Lord Abbett
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Health and Lord is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Health Care Fund and Lord Abbett Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lord Abbett Health and Health Care 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 Health Care 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 Health has no effect on the direction of Health Care i.e., Health Care and Lord Abbett go up and down completely randomly.
Pair Corralation between Health Care and Lord Abbett
Assuming the 90 days horizon Health Care is expected to generate 3.41 times less return on investment than Lord Abbett. But when comparing it to its historical volatility, Health Care Fund is 1.39 times less risky than Lord Abbett. It trades about 0.02 of its potential returns per unit of risk. Lord Abbett Health is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 1,839 in Lord Abbett Health on September 1, 2024 and sell it today you would earn a total of 145.00 from holding Lord Abbett Health or generate 7.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.47% |
| Values | Daily Returns |
Health Care Fund vs. Lord Abbett Health
Performance |
| Timeline |
| Health Care Fund |
| Lord Abbett Health |
Health Care and Lord Abbett Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Health Care and Lord Abbett
The main advantage of trading using opposite Health Care and Lord Abbett positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Health Care 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.| Health Care vs. Banking Fund Class | Health Care vs. Basic Materials Fund | Health Care vs. Biotechnology Fund Class | Health Care vs. Government Long Bond |
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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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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