Correlation Between Wilmington Diversified and Lord Abbett
Can any of the company-specific risk be diversified away by investing in both Wilmington Diversified 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 Wilmington Diversified and Lord Abbett into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wilmington Diversified Income and Lord Abbett Vertible, you can compare the effects of market volatilities on Wilmington Diversified 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 Wilmington Diversified with a short position of Lord Abbett. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wilmington Diversified and Lord Abbett.
Diversification Opportunities for Wilmington Diversified and Lord Abbett
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between Wilmington and Lord is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Wilmington Diversified Income and Lord Abbett Vertible in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lord Abbett Vertible and Wilmington Diversified 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 Wilmington Diversified Income 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 Vertible has no effect on the direction of Wilmington Diversified i.e., Wilmington Diversified and Lord Abbett go up and down completely randomly.
Pair Corralation between Wilmington Diversified and Lord Abbett
Assuming the 90 days horizon Wilmington Diversified Income is expected to generate 0.78 times more return on investment than Lord Abbett. However, Wilmington Diversified Income is 1.28 times less risky than Lord Abbett. It trades about 0.32 of its potential returns per unit of risk. Lord Abbett Vertible is currently generating about -0.01 per unit of risk. If you would invest 1,307 in Wilmington Diversified Income on October 19, 2024 and sell it today you would earn a total of 49.00 from holding Wilmington Diversified Income or generate 3.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.0% |
| Values | Daily Returns |
Wilmington Diversified Income vs. Lord Abbett Vertible
Performance |
| Timeline |
| Wilmington Diversified |
| Lord Abbett Vertible |
Wilmington Diversified and Lord Abbett Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wilmington Diversified and Lord Abbett
The main advantage of trading using opposite Wilmington Diversified and Lord Abbett positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wilmington Diversified 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 Wilmington Diversified Income and Lord Abbett Vertible 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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