Correlation Between Lord Abbett and North Star

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

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

Diversification Opportunities for Lord Abbett and North Star

0.65

Correlation Coefficient

Lord Abbett  North Star

Poor diversification

The 3 months correlation between Lord and North is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Lord Abbett Global and North Star Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on North Star Dividend and Lord Abbett 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 Lord Abbett Global are associated (or correlated) with North Star. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of North Star Dividend has no effect on the direction of Lord Abbett i.e., Lord Abbett and North Star go up and down completely randomly.

Pair Corralation between Lord Abbett and North Star

Assuming the 90 days horizon Lord Abbett Global is expected to generate 0.66 times more return on investment than North Star. However, Lord Abbett Global is 1.51 times less risky than North Star. It trades about -0.01 of its potential returns per unit of risk. North Star Dividend is currently generating about -0.02 per unit of risk. If you would invest  1,670  in Lord Abbett Global on September 21, 2024 and sell it today you would lose (8.00) from holding Lord Abbett Global or give up 0.48% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Lord Abbett Global  vs.  North Star Dividend

Lord Abbett Global

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lord Abbett Global has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Lord Abbett is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

North Star Dividend

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days North Star Dividend has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, North Star is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Lord Abbett and North Star

The main advantage of trading using opposite Lord Abbett and North Star positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lord Abbett position performs unexpectedly, North Star 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 North Star will offset losses from the drop in North Star's long position.

The idea behind Lord Abbett Global and North Star Dividend 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.