Correlation Between Materials Portfolio and Lord Abbett

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

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

Diversification Opportunities for Materials Portfolio and Lord Abbett

0.6

Correlation Coefficient

Materials Portfolio  Lord Abbett

Poor diversification

The 3 months correlation between Materials and Lord is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Materials Portfolio Fidelity 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 Materials Portfolio 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 Materials Portfolio Fidelity 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 Materials Portfolio i.e., Materials Portfolio and Lord Abbett go up and down completely randomly.

Pair Corralation between Materials Portfolio and Lord Abbett

Assuming the 90 days horizon Materials Portfolio Fidelity is expected to under-perform the Lord Abbett. In addition to that, Materials Portfolio is 1.75 times more volatile than Lord Abbett Focused. It trades about -0.5 of its total potential returns per unit of risk. Lord Abbett Focused is currently generating about -0.28 per unit of volatility. If you would invest  3,188  in Lord Abbett Focused on October 6, 2024 and sell it today you would lose (189.00) from holding Lord Abbett Focused or give up 5.93% of portfolio value over 90 days.

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

Materials Portfolio Fidelity  vs.  Lord Abbett Focused

Materials Portfolio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Materials Portfolio Fidelity has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's technical and fundamental indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Lord Abbett Focused

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lord Abbett Focused has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental 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 Materials Portfolio and Lord Abbett

The main advantage of trading using opposite Materials Portfolio and Lord Abbett positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Materials Portfolio 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 Materials Portfolio Fidelity 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.