Correlation Between Driehaus Micro and Lord Abbett

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

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

Diversification Opportunities for Driehaus Micro and Lord Abbett

0.98

Correlation Coefficient

Driehaus Micro  Lord Abbett

Almost no diversification

The 3 months correlation between Driehaus and Lord is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Driehaus Micro Cap and Lord Abbett Micro Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lord Abbett Micro and Driehaus Micro 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 Driehaus Micro Cap 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 Micro has no effect on the direction of Driehaus Micro i.e., Driehaus Micro and Lord Abbett go up and down completely randomly.

Pair Corralation between Driehaus Micro and Lord Abbett

Assuming the 90 days horizon Driehaus Micro Cap is expected to generate 1.07 times more return on investment than Lord Abbett. However, Driehaus Micro is 1.07 times more volatile than Lord Abbett Micro Cap. It trades about 0.22 of its potential returns per unit of risk. Lord Abbett Micro Cap is currently generating about 0.22 per unit of risk. If you would invest  1,282  in Driehaus Micro Cap on September 3, 2024 and sell it today you would earn a total of  297.00  from holding Driehaus Micro Cap or generate 23.17% return on investment over 90 days.

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

Driehaus Micro Cap  vs.  Lord Abbett Micro Cap

Driehaus Micro Cap

Risk-Adjusted Performance

17 of 100

Solid

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

Lord Abbett Micro

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Lord Abbett Micro Cap 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 Driehaus Micro and Lord Abbett

The main advantage of trading using opposite Driehaus Micro and Lord Abbett positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Driehaus Micro 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 Driehaus Micro Cap and Lord Abbett Micro Cap 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.