Correlation Between Lord Abbett and Short Oil

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

Diversification Opportunities for Lord Abbett and Short Oil

-0.03

Correlation Coefficient

Lord Abbett  Short Oil

Good diversification

The 3 months correlation between Lord and Short is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Lord Abbett Growth and Short Oil Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Short Oil Gas 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 Short Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Short Oil Gas has no effect on the direction of Lord Abbett i.e., Lord Abbett and Short Oil go up and down completely randomly.

Pair Corralation between Lord Abbett and Short Oil

Assuming the 90 days horizon Lord Abbett Growth is expected to under-perform the Short Oil. In addition to that, Lord Abbett is 1.78 times more volatile than Short Oil Gas. It trades about -0.08 of its total potential returns per unit of risk. Short Oil Gas is currently generating about -0.12 per unit of volatility. If you would invest  1,465  in Short Oil Gas on December 28, 2024 and sell it today you would lose (135.00) from holding Short Oil Gas or give up 9.22% of portfolio value over 90 days.

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

Lord Abbett Growth  vs.  Short Oil Gas

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.

Short Oil Gas

Risk-Adjusted Performance

Very Weak

Over the last 90 days Short Oil Gas 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 Short Oil

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

The idea behind Lord Abbett Growth and Short Oil Gas 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.