Correlation Between Multimanager Lifestyle and L Abbett

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

By analyzing existing cross correlation between Multimanager Lifestyle Moderate and L Abbett Growth, you can compare the effects of market volatilities on Multimanager Lifestyle 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 Multimanager Lifestyle with a short position of L Abbett. Check out your portfolio center. Please also check ongoing floating volatility patterns of Multimanager Lifestyle and L Abbett.

Diversification Opportunities for Multimanager Lifestyle and L Abbett

0.44

Correlation Coefficient

Multimanager Lifestyle  L Abbett

Very weak diversification

The 3 months correlation between Multimanager and LGLSX is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Multimanager Lifestyle Moderat 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 Multimanager Lifestyle 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 Multimanager Lifestyle Moderate 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 Multimanager Lifestyle i.e., Multimanager Lifestyle and L Abbett go up and down completely randomly.

Pair Corralation between Multimanager Lifestyle and L Abbett

Assuming the 90 days horizon Multimanager Lifestyle is expected to generate 8.9 times less return on investment than L Abbett. But when comparing it to its historical volatility, Multimanager Lifestyle Moderate is 3.83 times less risky than L Abbett. It trades about 0.13 of its potential returns per unit of risk. L Abbett Growth is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest  3,849  in L Abbett Growth on September 2, 2024 and sell it today you would earn a total of  940.00  from holding L Abbett Growth or generate 24.42% return on investment over 90 days.

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

Multimanager Lifestyle Moderat  vs.  L Abbett Growth

Multimanager Lifestyle

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Multimanager Lifestyle Moderate are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong primary indicators, Multimanager Lifestyle is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

L Abbett Growth

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in L Abbett Growth are ranked lower than 23 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, L Abbett showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Multimanager Lifestyle and L Abbett

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

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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.