Correlation Between Prudential Core and Lord Abbett

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

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

Diversification Opportunities for Prudential Core and Lord Abbett

-0.69

Correlation Coefficient

Prudential Core  Lord Abbett

Excellent diversification

The 3 months correlation between Prudential and Lord is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Core Conservative 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 Prudential Core 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 Prudential Core Conservative 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 Prudential Core i.e., Prudential Core and Lord Abbett go up and down completely randomly.

Pair Corralation between Prudential Core and Lord Abbett

Assuming the 90 days horizon Prudential Core is expected to generate 9.23 times less return on investment than Lord Abbett. But when comparing it to its historical volatility, Prudential Core Conservative is 3.2 times less risky than Lord Abbett. It trades about 0.04 of its potential returns per unit of risk. Lord Abbett Growth is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  2,383  in Lord Abbett Growth on September 12, 2024 and sell it today you would earn a total of  2,219  from holding Lord Abbett Growth or generate 93.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

Prudential Core Conservative  vs.  Lord Abbett Growth

Prudential Core Cons

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prudential Core Conservative has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Prudential Core is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Lord Abbett Growth

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Lord Abbett Growth are ranked lower than 20 (%) 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 Prudential Core and Lord Abbett

The main advantage of trading using opposite Prudential Core and Lord Abbett positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prudential Core 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 Prudential Core Conservative 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.