Correlation Between Aqr International and L Abbett

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

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

Diversification Opportunities for Aqr International and L Abbett

-0.68

Correlation Coefficient

Aqr International  L Abbett

Excellent diversification

The 3 months correlation between Aqr and LGLSX is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Aqr International Defensive 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 Aqr International 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 Aqr International Defensive 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 Aqr International i.e., Aqr International and L Abbett go up and down completely randomly.

Pair Corralation between Aqr International and L Abbett

Assuming the 90 days horizon Aqr International is expected to generate 12.56 times less return on investment than L Abbett. But when comparing it to its historical volatility, Aqr International Defensive is 2.12 times less risky than L Abbett. It trades about 0.01 of its potential returns per unit of risk. L Abbett Growth is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  3,732  in L Abbett Growth on October 7, 2024 and sell it today you would earn a total of  1,143  from holding L Abbett Growth or generate 30.63% return on investment over 90 days.

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

Aqr International Defensive  vs.  L Abbett Growth

Aqr International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aqr International Defensive has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

L Abbett Growth

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in L Abbett Growth are ranked lower than 15 (%) 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 Aqr International and L Abbett

The main advantage of trading using opposite Aqr International and L Abbett positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aqr International 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 Aqr International Defensive 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.