Correlation Between State Street and Lord Abbett
Can any of the company-specific risk be diversified away by investing in both State Street 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 State Street and Lord Abbett into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between State Street Equity and Lord Abbett Inflation, you can compare the effects of market volatilities on State Street 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 State Street with a short position of Lord Abbett. Check out your portfolio center. Please also check ongoing floating volatility patterns of State Street and Lord Abbett.
Diversification Opportunities for State Street and Lord Abbett
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between State and Lord is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding State Street Equity 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 State Street 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 State Street Equity 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 State Street i.e., State Street and Lord Abbett go up and down completely randomly.
Pair Corralation between State Street and Lord Abbett
Assuming the 90 days horizon State Street Equity is expected to generate 4.43 times more return on investment than Lord Abbett. However, State Street is 4.43 times more volatile than Lord Abbett Inflation. It trades about 0.13 of its potential returns per unit of risk. Lord Abbett Inflation is currently generating about 0.12 per unit of risk. If you would invest 32,737 in State Street Equity on September 12, 2024 and sell it today you would earn a total of 12,945 from holding State Street Equity or generate 39.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
State Street Equity vs. Lord Abbett Inflation
Performance |
| Timeline |
| State Street Equity |
| Lord Abbett Inflation |
State Street and Lord Abbett Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with State Street and Lord Abbett
The main advantage of trading using opposite State Street and Lord Abbett positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if State Street 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.| State Street vs. Lord Abbett Inflation | State Street vs. Federated Hermes Inflation | State Street vs. Loomis Sayles Inflation | State Street vs. Arrow Managed Futures |
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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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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