Correlation Between JPM America and Lord Abbett

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

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

Diversification Opportunities for JPM America and Lord Abbett

0.69

Correlation Coefficient

JPM America  Lord Abbett

Poor diversification

The 3 months correlation between JPM and Lord is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding JPM America Equity and Lord Abbett Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lord Abbett Short and JPM America 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 JPM America Equity 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 Short has no effect on the direction of JPM America i.e., JPM America and Lord Abbett go up and down completely randomly.

Pair Corralation between JPM America and Lord Abbett

Assuming the 90 days trading horizon JPM America Equity is expected to under-perform the Lord Abbett. In addition to that, JPM America is 1.75 times more volatile than Lord Abbett Short. It trades about -0.16 of its total potential returns per unit of risk. Lord Abbett Short is currently generating about -0.09 per unit of volatility. If you would invest  1,139  in Lord Abbett Short on December 22, 2024 and sell it today you would lose (35.00) from holding Lord Abbett Short or give up 3.07% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.72%
Values	Daily Returns

JPM America Equity  vs.  Lord Abbett Short

JPM America Equity

Risk-Adjusted Performance

Very Weak

Over the last 90 days JPM America Equity has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the fund shareholders.

Lord Abbett Short

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lord Abbett Short has generated negative risk-adjusted returns adding no value to fund investors. Despite somewhat 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 JPM America and Lord Abbett

The main advantage of trading using opposite JPM America and Lord Abbett positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JPM America 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 JPM America Equity and Lord Abbett Short 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.