Correlation Between Power Global and L Abbett

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

By analyzing existing cross correlation between Power Global Tactical and L Abbett Growth, you can compare the effects of market volatilities on Power Global and L 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 Power Global with a short position of L Abbett. Check out your portfolio center. Please also check ongoing floating volatility patterns of Power Global and L Abbett.

Diversification Opportunities for Power Global and L Abbett

0.73

Correlation Coefficient

Power Global  L Abbett

Poor diversification

The 3 months correlation between Power and LGLSX is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Power Global Tactical and L Abbett Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on L Abbett Growth and Power Global 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 Power Global Tactical are associated (or correlated) with L Abbett. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of L Abbett Growth has no effect on the direction of Power Global i.e., Power Global and L Abbett go up and down completely randomly.

Pair Corralation between Power Global and L Abbett

Assuming the 90 days horizon Power Global Tactical is expected to generate 0.29 times more return on investment than L Abbett. However, Power Global Tactical is 3.48 times less risky than L Abbett. It trades about -0.02 of its potential returns per unit of risk. L Abbett Growth is currently generating about -0.08 per unit of risk. If you would invest  1,071  in Power Global Tactical on December 28, 2024 and sell it today you would lose (9.00) from holding Power Global Tactical or give up 0.84% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

Power Global Tactical  vs.  L Abbett Growth

Power Global Tactical

Risk-Adjusted Performance

Very Weak

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

L Abbett Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days L Abbett Growth has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Power Global and L Abbett

The main advantage of trading using opposite Power Global and L Abbett positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Power Global position performs unexpectedly, L 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 L Abbett will offset losses from the drop in L Abbett's long position.

The idea behind Power Global Tactical and L Abbett Growth 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.