Correlation Between Smallcap Growth and Lord Abbett

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

By analyzing existing cross correlation between Smallcap Growth Fund and Lord Abbett Growth, you can compare the effects of market volatilities on Smallcap Growth 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 Smallcap Growth with a short position of Lord Abbett. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smallcap Growth and Lord Abbett.

Diversification Opportunities for Smallcap Growth and Lord Abbett

0.95

Correlation Coefficient

Smallcap Growth  Lord Abbett

Almost no diversification

The 3 months correlation between Smallcap and Lord is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Smallcap Growth Fund and Lord Abbett Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lord Abbett Growth and Smallcap Growth 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 Smallcap Growth Fund 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 Growth has no effect on the direction of Smallcap Growth i.e., Smallcap Growth and Lord Abbett go up and down completely randomly.

Pair Corralation between Smallcap Growth and Lord Abbett

Assuming the 90 days horizon Smallcap Growth is expected to generate 1.4 times less return on investment than Lord Abbett. But when comparing it to its historical volatility, Smallcap Growth Fund is 1.41 times less risky than Lord Abbett. It trades about 0.16 of its potential returns per unit of risk. Lord Abbett Growth is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  3,157  in Lord Abbett Growth on September 17, 2024 and sell it today you would earn a total of  132.00  from holding Lord Abbett Growth or generate 4.18% return on investment over 90 days.

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

Smallcap Growth Fund  vs.  Lord Abbett Growth

Smallcap Growth

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Smallcap Growth Fund are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Smallcap Growth may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Lord Abbett Growth

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Lord Abbett Growth are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Lord Abbett showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Smallcap Growth and Lord Abbett

The main advantage of trading using opposite Smallcap Growth and Lord Abbett positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Smallcap Growth 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.

The idea behind Smallcap Growth Fund and Lord Abbett Growth 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.