Correlation Between Century Small and L Abbett

Can any of the company-specific risk be diversified away by investing in both Century 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 Century 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 Century Small Cap and L Abbett Fundamental, you can compare the effects of market volatilities on Century 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 Century Small with a short position of L Abbett. Check out your portfolio center. Please also check ongoing floating volatility patterns of Century Small and L Abbett.

Diversification Opportunities for Century Small and L Abbett

0.94

Correlation Coefficient

Century Small  L Abbett

Almost no diversification

The 3 months correlation between Century and LAVVX is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Century Small Cap and L Abbett Fundamental in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on L Abbett Fundamental and Century 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 Century Small Cap 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 Fundamental has no effect on the direction of Century Small i.e., Century Small and L Abbett go up and down completely randomly.

Pair Corralation between Century Small and L Abbett

Assuming the 90 days horizon Century Small Cap is expected to generate 2.01 times more return on investment than L Abbett. However, Century Small is 2.01 times more volatile than L Abbett Fundamental. It trades about -0.03 of its potential returns per unit of risk. L Abbett Fundamental is currently generating about -0.13 per unit of risk. If you would invest  4,351  in Century Small Cap on September 12, 2024 and sell it today you would lose (35.00) from holding Century Small Cap or give up 0.8% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	95.45%
Values	Daily Returns

Century Small Cap  vs.  L Abbett Fundamental

Century Small Cap

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Century Small Cap are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Century Small may actually be approaching a critical reversion point that can send shares even higher in January 2025.

L Abbett Fundamental

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in L Abbett Fundamental are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, L Abbett may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Century Small and L Abbett

The main advantage of trading using opposite Century Small and L Abbett positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Century 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.

The idea behind Century Small Cap and L Abbett Fundamental 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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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.