Correlation Between Alcoa Corp and Lord Abbett

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

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

Diversification Opportunities for Alcoa Corp and Lord Abbett

0.84

Correlation Coefficient

Alcoa Corp  Lord Abbett

Very poor diversification

The 3 months correlation between Alcoa and Lord is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and Lord Abbett Govt in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lord Abbett Govt and Alcoa Corp 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 Alcoa Corp 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 Govt has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and Lord Abbett go up and down completely randomly.

Pair Corralation between Alcoa Corp and Lord Abbett

Allowing for the 90-day total investment horizon Alcoa Corp is expected to generate 24.52 times more return on investment than Lord Abbett. However, Alcoa Corp is 24.52 times more volatile than Lord Abbett Govt. It trades about 0.23 of its potential returns per unit of risk. Lord Abbett Govt is currently generating about 0.13 per unit of risk. If you would invest  3,015  in Alcoa Corp on August 31, 2024 and sell it today you would earn a total of  1,573  from holding Alcoa Corp or generate 52.17% return on investment over 90 days.

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

Alcoa Corp  vs.  Lord Abbett Govt

Alcoa Corp

Risk-Adjusted Performance

18 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alcoa Corp are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat sluggish basic indicators, Alcoa Corp sustained solid returns over the last few months and may actually be approaching a breakup point.

Lord Abbett Govt

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lord Abbett Govt are ranked lower than 9 (%) 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 Alcoa Corp and Lord Abbett

The main advantage of trading using opposite Alcoa Corp and Lord Abbett positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alcoa Corp 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 Alcoa Corp and Lord Abbett Govt 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.