Correlation Between Vanguard Small and L Abbett

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

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

Diversification Opportunities for Vanguard Small and L Abbett

0.77

Correlation Coefficient

Vanguard Small  L Abbett

Poor diversification

The 3 months correlation between Vanguard and LGLSX is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Value 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 Vanguard Small 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 Vanguard Small Cap Value 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 Vanguard Small i.e., Vanguard Small and L Abbett go up and down completely randomly.

Pair Corralation between Vanguard Small and L Abbett

Assuming the 90 days horizon Vanguard Small is expected to generate 43.57 times less return on investment than L Abbett. But when comparing it to its historical volatility, Vanguard Small Cap Value is 1.21 times less risky than L Abbett. It trades about 0.0 of its potential returns per unit of risk. L Abbett Growth is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  4,137  in L Abbett Growth on September 22, 2024 and sell it today you would earn a total of  607.00  from holding L Abbett Growth or generate 14.67% return on investment over 90 days.

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

Vanguard Small Cap Value  vs.  L Abbett Growth

Vanguard Small Cap

Risk-Adjusted Performance

0 of 100

Very Weak

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

L Abbett Growth

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in L Abbett Growth are ranked lower than 13 (%) 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 Vanguard Small and L Abbett

The main advantage of trading using opposite Vanguard Small and L Abbett positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Small 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 Vanguard Small Cap Value 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.