Correlation Between Lord Abbett and Asia Pacific

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

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

Diversification Opportunities for Lord Abbett and Asia Pacific

0.7

Correlation Coefficient

Lord Abbett  Asia Pacific

Poor diversification

The 3 months correlation between Lord and Asia is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Lord Abbett Health and Asia Pacific Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asia Pacific Small 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 Health are associated (or correlated) with Asia Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asia Pacific Small has no effect on the direction of Lord Abbett i.e., Lord Abbett and Asia Pacific go up and down completely randomly.

Pair Corralation between Lord Abbett and Asia Pacific

Assuming the 90 days horizon Lord Abbett Health is expected to generate 1.06 times more return on investment than Asia Pacific. However, Lord Abbett is 1.06 times more volatile than Asia Pacific Small. It trades about 0.03 of its potential returns per unit of risk. Asia Pacific Small is currently generating about 0.01 per unit of risk. If you would invest  1,684  in Lord Abbett Health on October 26, 2024 and sell it today you would earn a total of  238.00  from holding Lord Abbett Health or generate 14.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

Lord Abbett Health  vs.  Asia Pacific Small

Lord Abbett Health

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lord Abbett Health has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Lord Abbett is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Asia Pacific Small

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Asia Pacific Small has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Asia Pacific 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 Asia Pacific

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

The idea behind Lord Abbett Health and Asia Pacific Small 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 Stocks Directory module to find actively traded stocks across global markets.