Correlation Between Citigroup and Lord Abbett

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

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

Diversification Opportunities for Citigroup and Lord Abbett

0.96

Correlation Coefficient

Citigroup  Lord Abbett

Almost no diversification

The 3 months correlation between Citigroup and Lord is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Lord Abbett Focused in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lord Abbett Focused and Citigroup 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 Citigroup 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 Focused has no effect on the direction of Citigroup i.e., Citigroup and Lord Abbett go up and down completely randomly.

Pair Corralation between Citigroup and Lord Abbett

Taking into account the 90-day investment horizon Citigroup is expected to generate 6.9 times less return on investment than Lord Abbett. But when comparing it to its historical volatility, Citigroup is 1.32 times less risky than Lord Abbett. It trades about 0.01 of its potential returns per unit of risk. Lord Abbett Focused is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  3,583  in Lord Abbett Focused on September 29, 2024 and sell it today you would earn a total of  76.00  from holding Lord Abbett Focused or generate 2.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	95.24%
Values	Daily Returns

Citigroup  vs.  Lord Abbett Focused

Citigroup

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

Lord Abbett Focused

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Lord Abbett Focused are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Lord Abbett showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Lord Abbett

The main advantage of trading using opposite Citigroup and Lord Abbett positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup 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 Citigroup and Lord Abbett Focused 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.