Correlation Between Franklin Lifesmart and Lord Abbett

Can any of the company-specific risk be diversified away by investing in both Franklin Lifesmart 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 Lifesmart 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 Lifesmart 2030 and Lord Abbett Investment, you can compare the effects of market volatilities on Franklin Lifesmart 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 Lifesmart with a short position of Lord Abbett. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Lifesmart and Lord Abbett.

Diversification Opportunities for Franklin Lifesmart and Lord Abbett

-0.17

Correlation Coefficient

Franklin Lifesmart  Lord Abbett

Good diversification

The 3 months correlation between Franklin and Lord is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Lifesmart 2030 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 Franklin Lifesmart 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 Lifesmart 2030 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 Franklin Lifesmart i.e., Franklin Lifesmart and Lord Abbett go up and down completely randomly.

Pair Corralation between Franklin Lifesmart and Lord Abbett

Assuming the 90 days horizon Franklin Lifesmart is expected to generate 1.1 times less return on investment than Lord Abbett. In addition to that, Franklin Lifesmart is 4.52 times more volatile than Lord Abbett Investment. It trades about 0.05 of its total potential returns per unit of risk. Lord Abbett Investment is currently generating about 0.27 per unit of volatility. If you would invest  1,021  in Lord Abbett Investment on October 23, 2024 and sell it today you would earn a total of  6.00  from holding Lord Abbett Investment or generate 0.59% return on investment over 90 days.

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

Franklin Lifesmart 2030  vs.  Lord Abbett Investment

Franklin Lifesmart 2030

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Franklin Lifesmart 2030 has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Franklin Lifesmart is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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 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 Franklin Lifesmart and Lord Abbett

The main advantage of trading using opposite Franklin Lifesmart and Lord Abbett positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Lifesmart 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 Lifesmart 2030 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.