Correlation Between Schwab Health and L Abbett

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

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

Diversification Opportunities for Schwab Health and L Abbett

-0.75

Correlation Coefficient

Schwab Health  L Abbett

Pay attention - limited upside

The 3 months correlation between Schwab and LGLSX is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Schwab Health Care and L Abbett Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on L Abbett Growth and Schwab Health 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 Schwab Health Care are associated (or correlated) with L Abbett. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of L Abbett Growth has no effect on the direction of Schwab Health i.e., Schwab Health and L Abbett go up and down completely randomly.

Pair Corralation between Schwab Health and L Abbett

Assuming the 90 days horizon Schwab Health Care is expected to under-perform the L Abbett. But the mutual fund apears to be less risky and, when comparing its historical volatility, Schwab Health Care is 1.04 times less risky than L Abbett. The mutual fund trades about -0.25 of its potential returns per unit of risk. The L Abbett Growth is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  4,169  in L Abbett Growth on September 29, 2024 and sell it today you would earn a total of  751.00  from holding L Abbett Growth or generate 18.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Schwab Health Care  vs.  L Abbett Growth

Schwab Health Care

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Schwab Health Care has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's technical and fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

L Abbett Growth

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in L Abbett Growth are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, L Abbett showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Schwab Health and L Abbett

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

The idea behind Schwab Health Care and L 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.