Correlation Between Guggenheim Directional and Lord Abbett

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

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

Diversification Opportunities for Guggenheim Directional and Lord Abbett

0.42

Correlation Coefficient

Guggenheim Directional  Lord Abbett

Very weak diversification

The 3 months correlation between Guggenheim and Lord is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Guggenheim Directional Allocat and Lord Abbett Inflation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lord Abbett Inflation and Guggenheim Directional 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 Guggenheim Directional Allocation 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 Inflation has no effect on the direction of Guggenheim Directional i.e., Guggenheim Directional and Lord Abbett go up and down completely randomly.

Pair Corralation between Guggenheim Directional and Lord Abbett

Assuming the 90 days horizon Guggenheim Directional Allocation is expected to generate 4.1 times more return on investment than Lord Abbett. However, Guggenheim Directional is 4.1 times more volatile than Lord Abbett Inflation. It trades about 0.25 of its potential returns per unit of risk. Lord Abbett Inflation is currently generating about 0.1 per unit of risk. If you would invest  1,854  in Guggenheim Directional Allocation on September 5, 2024 and sell it today you would earn a total of  207.00  from holding Guggenheim Directional Allocation or generate 11.17% return on investment over 90 days.

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

Guggenheim Directional Allocat  vs.  Lord Abbett Inflation

Guggenheim Directional

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Guggenheim Directional Allocation are ranked lower than 19 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Guggenheim Directional may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Lord Abbett Inflation

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lord Abbett Inflation are ranked lower than 7 (%) 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.

Pair Trading with Guggenheim Directional and Lord Abbett

The main advantage of trading using opposite Guggenheim Directional and Lord Abbett positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Guggenheim Directional 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 Guggenheim Directional Allocation and Lord Abbett Inflation 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.