Correlation Between Lord Abbett and Old Westbury

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Can any of the company-specific risk be diversified away by investing in both Lord Abbett and Old Westbury 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 Old Westbury into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lord Abbett Growth and Old Westbury Municipal, you can compare the effects of market volatilities on Lord Abbett and Old Westbury 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 Old Westbury. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lord Abbett and Old Westbury.

Diversification Opportunities for Lord Abbett and Old Westbury

-0.1
  Correlation Coefficient

Good diversification

The 3 months correlation between Lord and Old is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Lord Abbett Growth and Old Westbury Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Old Westbury Municipal 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 Growth are associated (or correlated) with Old Westbury. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Old Westbury Municipal has no effect on the direction of Lord Abbett i.e., Lord Abbett and Old Westbury go up and down completely randomly.

Pair Corralation between Lord Abbett and Old Westbury

Assuming the 90 days horizon Lord Abbett Growth is expected to generate 7.68 times more return on investment than Old Westbury. However, Lord Abbett is 7.68 times more volatile than Old Westbury Municipal. It trades about 0.1 of its potential returns per unit of risk. Old Westbury Municipal is currently generating about 0.03 per unit of risk. If you would invest  2,179  in Lord Abbett Growth on September 29, 2024 and sell it today you would earn a total of  407.00  from holding Lord Abbett Growth or generate 18.68% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy99.21%
ValuesDaily Returns

Lord Abbett Growth  vs.  Old Westbury Municipal

 Performance 
       Timeline  
Lord Abbett Growth 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Lord Abbett Growth are ranked lower than 10 (%) 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.
Old Westbury Municipal 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Old Westbury Municipal has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental drivers, Old Westbury is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Lord Abbett and Old Westbury Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Lord Abbett and Old Westbury

The main advantage of trading using opposite Lord Abbett and Old Westbury positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lord Abbett position performs unexpectedly, Old Westbury 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 Old Westbury will offset losses from the drop in Old Westbury's long position.
The idea behind Lord Abbett Growth and Old Westbury Municipal 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.

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