Correlation Between Lord Abbett and World Energy

Can any of the company-specific risk be diversified away by investing in both Lord Abbett and World Energy 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 World Energy 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 World Energy Fund, you can compare the effects of market volatilities on Lord Abbett and World Energy 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 World Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lord Abbett and World Energy.

Diversification Opportunities for Lord Abbett and World Energy

0.74

Correlation Coefficient

Lord Abbett  World Energy

Poor diversification

The 3 months correlation between Lord and World is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Lord Abbett Growth and World Energy Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on World Energy 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 World Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of World Energy has no effect on the direction of Lord Abbett i.e., Lord Abbett and World Energy go up and down completely randomly.

Pair Corralation between Lord Abbett and World Energy

Assuming the 90 days horizon Lord Abbett Growth is expected to under-perform the World Energy. In addition to that, Lord Abbett is 1.35 times more volatile than World Energy Fund. It trades about -0.08 of its total potential returns per unit of risk. World Energy Fund is currently generating about 0.02 per unit of volatility. If you would invest  1,449  in World Energy Fund on December 28, 2024 and sell it today you would earn a total of  14.00  from holding World Energy Fund or generate 0.97% return on investment over 90 days.

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

Lord Abbett Growth  vs.  World Energy Fund

Lord Abbett Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lord Abbett Growth 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 strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

World Energy

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in World Energy Fund are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, World Energy 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 World Energy

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

The idea behind Lord Abbett Growth and World Energy Fund 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.