Correlation Between L Abbett and Vanguard Mega

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

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

Diversification Opportunities for L Abbett and Vanguard Mega

0.93

Correlation Coefficient

L Abbett  Vanguard Mega

Almost no diversification

The 3 months correlation between LGLSX and Vanguard is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding L Abbett Growth and Vanguard Mega Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Mega Cap and L 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 L Abbett Growth are associated (or correlated) with Vanguard Mega. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Mega Cap has no effect on the direction of L Abbett i.e., L Abbett and Vanguard Mega go up and down completely randomly.

Pair Corralation between L Abbett and Vanguard Mega

Assuming the 90 days horizon L Abbett Growth is expected to generate 1.26 times more return on investment than Vanguard Mega. However, L Abbett is 1.26 times more volatile than Vanguard Mega Cap. It trades about 0.19 of its potential returns per unit of risk. Vanguard Mega Cap is currently generating about 0.12 per unit of risk. If you would invest  4,337  in L Abbett Growth on October 26, 2024 and sell it today you would earn a total of  751.00  from holding L Abbett Growth or generate 17.32% return on investment over 90 days.

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

L Abbett Growth  vs.  Vanguard Mega Cap

L Abbett Growth

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in L Abbett Growth are ranked lower than 15 (%) 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.

Vanguard Mega Cap

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Mega Cap are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Vanguard Mega may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with L Abbett and Vanguard Mega

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

The idea behind L Abbett Growth and Vanguard Mega Cap 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.