Correlation Between Hennessy Cornerstone and Lord Abbett

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

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

Diversification Opportunities for Hennessy Cornerstone and Lord Abbett

0.99

Correlation Coefficient

Hennessy Cornerstone  Lord Abbett

No risk reduction

The 3 months correlation between Hennessy and Lord is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Hennessy Nerstone Mid and Lord Abbett Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lord Abbett Small and Hennessy Cornerstone 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 Hennessy Nerstone Mid 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 Small has no effect on the direction of Hennessy Cornerstone i.e., Hennessy Cornerstone and Lord Abbett go up and down completely randomly.

Pair Corralation between Hennessy Cornerstone and Lord Abbett

Assuming the 90 days horizon Hennessy Nerstone Mid is expected to under-perform the Lord Abbett. In addition to that, Hennessy Cornerstone is 1.04 times more volatile than Lord Abbett Small. It trades about -0.11 of its total potential returns per unit of risk. Lord Abbett Small is currently generating about -0.1 per unit of volatility. If you would invest  2,115  in Lord Abbett Small on December 29, 2024 and sell it today you would lose (148.00) from holding Lord Abbett Small or give up 7.0% of portfolio value over 90 days.

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

Hennessy Nerstone Mid  vs.  Lord Abbett Small

Hennessy Nerstone Mid

Risk-Adjusted Performance

Very Weak

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

Lord Abbett Small

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lord Abbett Small 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 Hennessy Cornerstone and Lord Abbett

The main advantage of trading using opposite Hennessy Cornerstone and Lord Abbett positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hennessy Cornerstone 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 Hennessy Nerstone Mid and Lord Abbett Small 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.

Check out your portfolio center.

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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.