Correlation Between Baird Quality and Lord Abbett

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

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

Diversification Opportunities for Baird Quality and Lord Abbett

0.28

Correlation Coefficient

Baird Quality  Lord Abbett

Modest diversification

The 3 months correlation between Baird and Lord is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Baird Quality Intermediate and Lord Abbett International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lord Abbett International and Baird Quality 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 Baird Quality Intermediate 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 International has no effect on the direction of Baird Quality i.e., Baird Quality and Lord Abbett go up and down completely randomly.

Pair Corralation between Baird Quality and Lord Abbett

Assuming the 90 days horizon Baird Quality is expected to generate 3.78 times less return on investment than Lord Abbett. But when comparing it to its historical volatility, Baird Quality Intermediate is 5.54 times less risky than Lord Abbett. It trades about 0.04 of its potential returns per unit of risk. Lord Abbett International is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,316  in Lord Abbett International on October 12, 2024 and sell it today you would earn a total of  150.00  from holding Lord Abbett International or generate 11.4% return on investment over 90 days.

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

Baird Quality Intermediate  vs.  Lord Abbett International

Baird Quality Interm

Risk-Adjusted Performance

0 of 100

Very Weak

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

Lord Abbett International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lord Abbett International 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.

Pair Trading with Baird Quality and Lord Abbett

The main advantage of trading using opposite Baird Quality and Lord Abbett positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Baird Quality 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 Baird Quality Intermediate and Lord Abbett International 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.