Correlation Between Franklin California and Lord Abbett

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

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

Diversification Opportunities for Franklin California and Lord Abbett

0.72

Correlation Coefficient

Franklin California  Lord Abbett

Poor diversification

The 3 months correlation between Franklin and Lord is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Franklin California High and Lord Abbett Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lord Abbett Emerging and Franklin California 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 Franklin California High 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 Emerging has no effect on the direction of Franklin California i.e., Franklin California and Lord Abbett go up and down completely randomly.

Pair Corralation between Franklin California and Lord Abbett

Assuming the 90 days horizon Franklin California is expected to generate 1.15 times less return on investment than Lord Abbett. But when comparing it to its historical volatility, Franklin California High is 1.09 times less risky than Lord Abbett. It trades about 0.06 of its potential returns per unit of risk. Lord Abbett Emerging is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  423.00  in Lord Abbett Emerging on September 5, 2024 and sell it today you would earn a total of  5.00  from holding Lord Abbett Emerging or generate 1.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Franklin California High  vs.  Lord Abbett Emerging

Franklin California High

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin California High are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Franklin California is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Lord Abbett Emerging

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Lord Abbett Emerging are ranked lower than 5 (%) 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 Franklin California and Lord Abbett

The main advantage of trading using opposite Franklin California and Lord Abbett positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin California 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 Franklin California High and Lord Abbett Emerging 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 CEOs Directory module to screen CEOs from public companies around the world.