Correlation Between M Large and Lord Abbett
Can any of the company-specific risk be diversified away by investing in both M Large and Lord Abbett 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 M Large and Lord Abbett into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between M Large Cap and Lord Abbett Health, you can compare the effects of market volatilities on M Large and Lord Abbett 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 M Large with a short position of Lord Abbett. Check out your portfolio center. Please also check ongoing floating volatility patterns of M Large and Lord Abbett.
Diversification Opportunities for M Large and Lord Abbett
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between MTCGX and Lord is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding M Large Cap and Lord Abbett Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lord Abbett Health and M Large 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 M Large Cap are associated (or correlated) with Lord Abbett. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lord Abbett Health has no effect on the direction of M Large i.e., M Large and Lord Abbett go up and down completely randomly.
Pair Corralation between M Large and Lord Abbett
Assuming the 90 days horizon M Large Cap is expected to generate 1.19 times more return on investment than Lord Abbett. However, M Large is 1.19 times more volatile than Lord Abbett Health. It trades about 0.1 of its potential returns per unit of risk. Lord Abbett Health is currently generating about 0.06 per unit of risk. If you would invest 2,671 in M Large Cap on September 26, 2024 and sell it today you would earn a total of 1,088 from holding M Large Cap or generate 40.73% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
M Large Cap vs. Lord Abbett Health
Performance |
Timeline |
M Large Cap |
Lord Abbett Health |
M Large and Lord Abbett Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with M Large and Lord Abbett
The main advantage of trading using opposite M Large and Lord Abbett positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if M Large position performs unexpectedly, Lord Abbett 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 Lord Abbett will offset losses from the drop in Lord Abbett's long position.M Large vs. Lord Abbett Convertible | M Large vs. Calamos Dynamic Convertible | M Large vs. Rationalpier 88 Convertible | M Large vs. Virtus Convertible |
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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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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