Correlation Between Lord Abbett and American Beacon

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

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

Diversification Opportunities for Lord Abbett and American Beacon

0.44

Correlation Coefficient

Lord Abbett  American Beacon

Very weak diversification

The 3 months correlation between Lord and American is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Lord Abbett Convertible and American Beacon Bridgeway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Beacon Bridgeway and Lord Abbett 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 Lord Abbett Convertible are associated (or correlated) with American Beacon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Beacon Bridgeway has no effect on the direction of Lord Abbett i.e., Lord Abbett and American Beacon go up and down completely randomly.

Pair Corralation between Lord Abbett and American Beacon

Assuming the 90 days horizon Lord Abbett Convertible is expected to generate 0.32 times more return on investment than American Beacon. However, Lord Abbett Convertible is 3.16 times less risky than American Beacon. It trades about -0.22 of its potential returns per unit of risk. American Beacon Bridgeway is currently generating about -0.27 per unit of risk. If you would invest  1,504  in Lord Abbett Convertible on October 7, 2024 and sell it today you would lose (59.00) from holding Lord Abbett Convertible or give up 3.92% of portfolio value over 90 days.

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

Lord Abbett Convertible  vs.  American Beacon Bridgeway

Lord Abbett Convertible

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lord Abbett Convertible are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly 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.

American Beacon Bridgeway

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Lord Abbett and American Beacon

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

The idea behind Lord Abbett Convertible and American Beacon Bridgeway 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.