Correlation Between Vanguard Small and L Abbett
Can any of the company-specific risk be diversified away by investing in both Vanguard Small and L 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 Vanguard Small and L Abbett into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Small Cap Value and L Abbett Growth, you can compare the effects of market volatilities on Vanguard Small and L 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 Vanguard Small with a short position of L Abbett. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Small and L Abbett.
Diversification Opportunities for Vanguard Small and L Abbett
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Vanguard and LGLSX is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Value and L Abbett Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on L Abbett Growth and Vanguard Small 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 Vanguard Small Cap Value are associated (or correlated) with L Abbett. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of L Abbett Growth has no effect on the direction of Vanguard Small i.e., Vanguard Small and L Abbett go up and down completely randomly.
Pair Corralation between Vanguard Small and L Abbett
Assuming the 90 days horizon Vanguard Small Cap Value is expected to under-perform the L Abbett. But the mutual fund apears to be less risky and, when comparing its historical volatility, Vanguard Small Cap Value is 1.37 times less risky than L Abbett. The mutual fund trades about -0.25 of its potential returns per unit of risk. The L Abbett Growth is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 4,788 in L Abbett Growth on September 22, 2024 and sell it today you would lose (44.00) from holding L Abbett Growth or give up 0.92% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Small Cap Value vs. L Abbett Growth
Performance |
| Timeline |
| Vanguard Small Cap |
| L Abbett Growth |
Vanguard Small and L Abbett Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Small and L Abbett
The main advantage of trading using opposite Vanguard Small and L Abbett positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Small position performs unexpectedly, L 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 L Abbett will offset losses from the drop in L Abbett's long position.| Vanguard Small vs. Tortoise Energy Independence | Vanguard Small vs. World Energy Fund | Vanguard Small vs. Calvert Global Energy | Vanguard Small vs. Dreyfus Natural Resources |
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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 Stocks Directory module to find actively traded stocks across global markets.
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