Correlation Between Lord Abbett and Goldman Sachs

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

By analyzing existing cross correlation between Lord Abbett Health and Goldman Sachs Dynamic, you can compare the effects of market volatilities on Lord Abbett and Goldman Sachs 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 Goldman Sachs. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lord Abbett and Goldman Sachs.

Diversification Opportunities for Lord Abbett and Goldman Sachs

0.01

Correlation Coefficient

Lord Abbett  Goldman Sachs

Significant diversification

The 3 months correlation between Lord and Goldman is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Lord Abbett Health and Goldman Sachs Dynamic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs Dynamic 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 Health are associated (or correlated) with Goldman Sachs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Goldman Sachs Dynamic has no effect on the direction of Lord Abbett i.e., Lord Abbett and Goldman Sachs go up and down completely randomly.

Pair Corralation between Lord Abbett and Goldman Sachs

Assuming the 90 days horizon Lord Abbett is expected to generate 1.98 times less return on investment than Goldman Sachs. In addition to that, Lord Abbett is 1.29 times more volatile than Goldman Sachs Dynamic. It trades about 0.05 of its total potential returns per unit of risk. Goldman Sachs Dynamic is currently generating about 0.12 per unit of volatility. If you would invest  1,799  in Goldman Sachs Dynamic on September 1, 2024 and sell it today you would earn a total of  320.00  from holding Goldman Sachs Dynamic or generate 17.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.47%
Values	Daily Returns

Lord Abbett Health  vs.  Goldman Sachs Dynamic

Lord Abbett Health

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lord Abbett Health are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Lord Abbett is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Goldman Sachs Dynamic

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Goldman Sachs Dynamic are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Goldman Sachs may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Lord Abbett and Goldman Sachs

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

The idea behind Lord Abbett Health and Goldman Sachs Dynamic 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.