Correlation Between Touchstone International and Lord Abbett
Can any of the company-specific risk be diversified away by investing in both Touchstone International 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 Touchstone International and Lord Abbett into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Touchstone International Equity and Lord Abbett Global, you can compare the effects of market volatilities on Touchstone International 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 Touchstone International with a short position of Lord Abbett. Check out your portfolio center. Please also check ongoing floating volatility patterns of Touchstone International and Lord Abbett.
Diversification Opportunities for Touchstone International and Lord Abbett
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Touchstone and Lord is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Touchstone International Equit and Lord Abbett Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lord Abbett Global and Touchstone International 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 Touchstone International 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 Global has no effect on the direction of Touchstone International i.e., Touchstone International and Lord Abbett go up and down completely randomly.
Pair Corralation between Touchstone International and Lord Abbett
Assuming the 90 days horizon Touchstone International Equity is expected to generate 0.75 times more return on investment than Lord Abbett. However, Touchstone International Equity is 1.33 times less risky than Lord Abbett. It trades about 0.2 of its potential returns per unit of risk. Lord Abbett Global is currently generating about 0.12 per unit of risk. If you would invest 1,358 in Touchstone International Equity on October 20, 2024 and sell it today you would earn a total of 33.00 from holding Touchstone International Equity or generate 2.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Touchstone International Equit vs. Lord Abbett Global
Performance |
| Timeline |
| Touchstone International |
| Lord Abbett Global |
Touchstone International and Lord Abbett Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Touchstone International and Lord Abbett
The main advantage of trading using opposite Touchstone International and Lord Abbett positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Touchstone International 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.The idea behind Touchstone International Equity and Lord Abbett Global pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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