Correlation Between Lord Abbett and Vulcan Value

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

Diversification Opportunities for Lord Abbett and Vulcan Value

0.32

Correlation Coefficient

Lord Abbett  Vulcan Value

Weak diversification

The 3 months correlation between Lord and Vulcan is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Lord Abbett Health and Vulcan Value Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vulcan Value Partners 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 Vulcan Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vulcan Value Partners has no effect on the direction of Lord Abbett i.e., Lord Abbett and Vulcan Value go up and down completely randomly.

Pair Corralation between Lord Abbett and Vulcan Value

Assuming the 90 days horizon Lord Abbett is expected to generate 1.73 times less return on investment than Vulcan Value. But when comparing it to its historical volatility, Lord Abbett Health is 1.15 times less risky than Vulcan Value. It trades about 0.03 of its potential returns per unit of risk. Vulcan Value Partners is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  990.00  in Vulcan Value Partners on September 12, 2024 and sell it today you would earn a total of  275.00  from holding Vulcan Value Partners or generate 27.78% return on investment over 90 days.

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

Lord Abbett Health  vs.  Vulcan Value Partners

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.

Vulcan Value Partners

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Vulcan Value Partners are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Vulcan Value 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 Vulcan Value

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

The idea behind Lord Abbett Health and Vulcan Value Partners 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.