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
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Health and Lord is 0.74. 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 Fund is expected to generate 0.84 times more return on investment than Lord Abbett. However, Health Care Fund is 1.19 times less risky than Lord Abbett. It trades about 0.33 of its potential returns per unit of risk. Lord Abbett Health is currently generating about 0.19 per unit of risk. If you would invest 2,896 in Health Care Fund on November 4, 2024 and sell it today you would earn a total of 156.00 from holding Health Care Fund or generate 5.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| 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. Ab Bond Inflation | Health Care vs. Fidelity Sai Inflationfocused | Health Care vs. Abbey Capital Futures | Health Care 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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