Correlation Between Lord Abbett and Ultrashort Small

Can any of the company-specific risk be diversified away by investing in both Lord Abbett and Ultrashort Small 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 Ultrashort Small 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 Ultrashort Small Cap Profund, you can compare the effects of market volatilities on Lord Abbett and Ultrashort Small 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 Ultrashort Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lord Abbett and Ultrashort Small.

Diversification Opportunities for Lord Abbett and Ultrashort Small

-0.55

Correlation Coefficient

Lord Abbett  Ultrashort Small

Excellent diversification

The 3 months correlation between Lord and Ultrashort is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Lord Abbett Health and Ultrashort Small Cap Profund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ultrashort Small Cap 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 Ultrashort Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ultrashort Small Cap has no effect on the direction of Lord Abbett i.e., Lord Abbett and Ultrashort Small go up and down completely randomly.

Pair Corralation between Lord Abbett and Ultrashort Small

Assuming the 90 days horizon Lord Abbett Health is expected to generate 0.38 times more return on investment than Ultrashort Small. However, Lord Abbett Health is 2.64 times less risky than Ultrashort Small. It trades about -0.04 of its potential returns per unit of risk. Ultrashort Small Cap Profund is currently generating about -0.02 per unit of risk. If you would invest  1,924  in Lord Abbett Health on October 1, 2024 and sell it today you would lose (60.00) from holding Lord Abbett Health or give up 3.12% of portfolio value over 90 days.

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

Lord Abbett Health  vs.  Ultrashort Small Cap Profund

Lord Abbett Health

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lord Abbett Health has generated negative risk-adjusted returns adding no value to fund investors. 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.

Ultrashort Small Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ultrashort Small Cap Profund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Ultrashort Small 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 Ultrashort Small

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

The idea behind Lord Abbett Health and Ultrashort Small Cap Profund 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.