Correlation Between Ashmore Emerging and Lord Abbett

Can any of the company-specific risk be diversified away by investing in both Ashmore Emerging 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 Ashmore Emerging and Lord Abbett into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ashmore Emerging Markets and Lord Abbett Small, you can compare the effects of market volatilities on Ashmore Emerging 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 Ashmore Emerging with a short position of Lord Abbett. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ashmore Emerging and Lord Abbett.

Diversification Opportunities for Ashmore Emerging and Lord Abbett

-0.3

Correlation Coefficient

Ashmore Emerging  Lord Abbett

Very good diversification

The 3 months correlation between Ashmore and Lord is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Ashmore Emerging Markets and Lord Abbett Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lord Abbett Small and Ashmore Emerging 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 Ashmore Emerging Markets 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 Small has no effect on the direction of Ashmore Emerging i.e., Ashmore Emerging and Lord Abbett go up and down completely randomly.

Pair Corralation between Ashmore Emerging and Lord Abbett

Assuming the 90 days horizon Ashmore Emerging Markets is expected to generate 0.9 times more return on investment than Lord Abbett. However, Ashmore Emerging Markets is 1.11 times less risky than Lord Abbett. It trades about 0.2 of its potential returns per unit of risk. Lord Abbett Small is currently generating about 0.09 per unit of risk. If you would invest  765.00  in Ashmore Emerging Markets on September 17, 2024 and sell it today you would earn a total of  21.00  from holding Ashmore Emerging Markets or generate 2.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Ashmore Emerging Markets  vs.  Lord Abbett Small

Ashmore Emerging Markets

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ashmore Emerging Markets are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Ashmore Emerging is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Lord Abbett Small

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lord Abbett Small are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Lord Abbett may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Ashmore Emerging and Lord Abbett

The main advantage of trading using opposite Ashmore Emerging and Lord Abbett positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ashmore Emerging 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 Ashmore Emerging Markets and Lord Abbett Small 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.