Correlation Between Floating Rate and L Abbett

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

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

Diversification Opportunities for Floating Rate and L Abbett

0.87

Correlation Coefficient

Floating Rate  L Abbett

Very poor diversification

The 3 months correlation between Floating and LGLUX is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Floating Rate Fund 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 Floating Rate 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 Floating Rate Fund 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 Floating Rate i.e., Floating Rate and L Abbett go up and down completely randomly.

Pair Corralation between Floating Rate and L Abbett

Assuming the 90 days horizon Floating Rate Fund is expected to under-perform the L Abbett. But the mutual fund apears to be less risky and, when comparing its historical volatility, Floating Rate Fund is 31.89 times less risky than L Abbett. The mutual fund trades about -0.12 of its potential returns per unit of risk. The L Abbett Growth is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  5,029  in L Abbett Growth on September 23, 2024 and sell it today you would earn a total of  47.00  from holding L Abbett Growth or generate 0.93% return on investment over 90 days.

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

Floating Rate Fund  vs.  L Abbett Growth

Floating Rate

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Floating Rate Fund are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Floating Rate 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

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in L Abbett Growth are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, L Abbett showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Floating Rate and L Abbett

The main advantage of trading using opposite Floating Rate and L Abbett positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Floating Rate 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 Floating Rate Fund 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.

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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.