Correlation Between Lord Abbett and Short-term Fund

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

By analyzing existing cross correlation between Lord Abbett Ultra and Short Term Fund Institutional, you can compare the effects of market volatilities on Lord Abbett and Short-term Fund 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 Short-term Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lord Abbett and Short-term Fund.

Diversification Opportunities for Lord Abbett and Short-term Fund

0.94

Correlation Coefficient

Lord Abbett  Short-term Fund

Almost no diversification

The 3 months correlation between Lord and Short-term is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Lord Abbett Ultra and Short Term Fund Institutional in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Short Term Fund 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 Ultra are associated (or correlated) with Short-term Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Short Term Fund has no effect on the direction of Lord Abbett i.e., Lord Abbett and Short-term Fund go up and down completely randomly.

Pair Corralation between Lord Abbett and Short-term Fund

Assuming the 90 days horizon Lord Abbett is expected to generate 1.43 times less return on investment than Short-term Fund. But when comparing it to its historical volatility, Lord Abbett Ultra is 1.04 times less risky than Short-term Fund. It trades about 0.15 of its potential returns per unit of risk. Short Term Fund Institutional is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  955.00  in Short Term Fund Institutional on September 4, 2024 and sell it today you would earn a total of  11.00  from holding Short Term Fund Institutional or generate 1.15% return on investment over 90 days.

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

Lord Abbett Ultra  vs.  Short Term Fund Institutional

Lord Abbett Ultra

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lord Abbett Ultra are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Lord Abbett is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Short Term Fund

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Short Term Fund Institutional are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical indicators, Short-term Fund 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 Short-term Fund

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

The idea behind Lord Abbett Ultra and Short Term Fund Institutional 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..