Correlation Between Lord Abbett and Broad Cap

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

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

Diversification Opportunities for Lord Abbett and Broad Cap

-0.02

Correlation Coefficient

Lord Abbett  Broad Cap

Good diversification

The 3 months correlation between Lord and Broad is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Lord Abbett Short and Broad Cap Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Broad Cap Value 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 Short are associated (or correlated) with Broad Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Broad Cap Value has no effect on the direction of Lord Abbett i.e., Lord Abbett and Broad Cap go up and down completely randomly.

Pair Corralation between Lord Abbett and Broad Cap

Assuming the 90 days horizon Lord Abbett Short is expected to generate 0.1 times more return on investment than Broad Cap. However, Lord Abbett Short is 9.91 times less risky than Broad Cap. It trades about 0.22 of its potential returns per unit of risk. Broad Cap Value is currently generating about -0.18 per unit of risk. If you would invest  387.00  in Lord Abbett Short on September 12, 2024 and sell it today you would earn a total of  1.00  from holding Lord Abbett Short or generate 0.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Lord Abbett Short  vs.  Broad Cap Value

Lord Abbett Short

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lord Abbett Short 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.

Broad Cap Value

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Broad Cap Value are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Broad Cap may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Lord Abbett and Broad Cap

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

The idea behind Lord Abbett Short and Broad Cap Value 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.