Correlation Between Lord Abbett and Franklin Equity

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

By analyzing existing cross correlation between Lord Abbett Growth and Franklin Equity Income, you can compare the effects of market volatilities on Lord Abbett and Franklin Equity 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 Franklin Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lord Abbett and Franklin Equity.

Diversification Opportunities for Lord Abbett and Franklin Equity

-0.11

Correlation Coefficient

Lord Abbett  Franklin Equity

Good diversification

The 3 months correlation between Lord and Franklin is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Lord Abbett Growth and Franklin Equity Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Equity Income 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 Growth are associated (or correlated) with Franklin Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Equity Income has no effect on the direction of Lord Abbett i.e., Lord Abbett and Franklin Equity go up and down completely randomly.

Pair Corralation between Lord Abbett and Franklin Equity

Assuming the 90 days horizon Lord Abbett Growth is expected to generate 1.2 times more return on investment than Franklin Equity. However, Lord Abbett is 1.2 times more volatile than Franklin Equity Income. It trades about 0.18 of its potential returns per unit of risk. Franklin Equity Income is currently generating about -0.13 per unit of risk. If you would invest  4,503  in Lord Abbett Growth on October 9, 2024 and sell it today you would earn a total of  698.00  from holding Lord Abbett Growth or generate 15.5% return on investment over 90 days.

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

Lord Abbett Growth  vs.  Franklin Equity Income

Lord Abbett Growth

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lord Abbett Growth are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Lord Abbett showed solid returns over the last few months and may actually be approaching a breakup point.

Franklin Equity Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Franklin Equity Income has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's forward 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 Lord Abbett and Franklin Equity

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

The idea behind Lord Abbett Growth and Franklin Equity Income 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 Anywhere module to track or share privately all of your investments from the convenience of any device.