Correlation Between Chevron Corp and Lord Abbett

Can any of the company-specific risk be diversified away by investing in both Chevron 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 Chevron 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 Chevron Corp and Lord Abbett Investment, you can compare the effects of market volatilities on Chevron 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 Chevron Corp with a short position of Lord Abbett. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chevron Corp and Lord Abbett.

Diversification Opportunities for Chevron Corp and Lord Abbett

0.04

Correlation Coefficient

Chevron Corp  Lord Abbett

Significant diversification

The 3 months correlation between Chevron and Lord is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Chevron Corp and Lord Abbett Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lord Abbett Investment and Chevron 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 Chevron 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 Investment has no effect on the direction of Chevron Corp i.e., Chevron Corp and Lord Abbett go up and down completely randomly.

Pair Corralation between Chevron Corp and Lord Abbett

Considering the 90-day investment horizon Chevron Corp is expected to generate 8.36 times more return on investment than Lord Abbett. However, Chevron Corp is 8.36 times more volatile than Lord Abbett Investment. It trades about 0.03 of its potential returns per unit of risk. Lord Abbett Investment is currently generating about 0.28 per unit of risk. If you would invest  14,969  in Chevron Corp on October 22, 2024 and sell it today you would earn a total of  1,178  from holding Chevron Corp or generate 7.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.56%
Values	Daily Returns

Chevron Corp  vs.  Lord Abbett Investment

Chevron Corp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Chevron Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Chevron Corp may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Lord Abbett Investment

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Lord Abbett Investment are ranked lower than 19 (%) 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 Chevron Corp and Lord Abbett

The main advantage of trading using opposite Chevron Corp and Lord Abbett positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chevron 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 Chevron Corp and Lord Abbett Investment 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.