Correlation Between Stone Ridge and Lord Abbett
Can any of the company-specific risk be diversified away by investing in both Stone Ridge 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 Stone Ridge and Lord Abbett into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stone Ridge Diversified and Lord Abbett Diversified, you can compare the effects of market volatilities on Stone Ridge 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 Stone Ridge with a short position of Lord Abbett. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stone Ridge and Lord Abbett.
Diversification Opportunities for Stone Ridge and Lord Abbett
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Stone and Lord is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Stone Ridge Diversified 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 Stone Ridge 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 Stone Ridge Diversified 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 Stone Ridge i.e., Stone Ridge and Lord Abbett go up and down completely randomly.
Pair Corralation between Stone Ridge and Lord Abbett
Assuming the 90 days horizon Stone Ridge Diversified is expected to generate 0.56 times more return on investment than Lord Abbett. However, Stone Ridge Diversified is 1.78 times less risky than Lord Abbett. It trades about 0.25 of its potential returns per unit of risk. Lord Abbett Diversified is currently generating about 0.12 per unit of risk. If you would invest 889.00 in Stone Ridge Diversified on September 12, 2024 and sell it today you would earn a total of 253.00 from holding Stone Ridge Diversified or generate 28.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Stone Ridge Diversified vs. Lord Abbett Diversified
Performance |
| Timeline |
| Stone Ridge Diversified |
| Lord Abbett Diversified |
Stone Ridge and Lord Abbett Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Stone Ridge and Lord Abbett
The main advantage of trading using opposite Stone Ridge and Lord Abbett positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stone Ridge 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.| Stone Ridge vs. Blackrock Alternative Capital | Stone Ridge vs. Aqr Style Premia | Stone Ridge vs. Goldman Sachs Absolute | Stone Ridge vs. Aquagold International |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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