Correlation Between Lord Abbett and Pax Msci

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

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

Diversification Opportunities for Lord Abbett and Pax Msci

0.93

Correlation Coefficient

Lord Abbett  Pax Msci

Almost no diversification

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

Pair Corralation between Lord Abbett and Pax Msci

Assuming the 90 days horizon Lord Abbett is expected to generate 5.17 times less return on investment than Pax Msci. But when comparing it to its historical volatility, Lord Abbett Diversified is 2.22 times less risky than Pax Msci. It trades about 0.07 of its potential returns per unit of risk. Pax Msci Eafe is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  1,069  in Pax Msci Eafe on December 2, 2024 and sell it today you would earn a total of  24.00  from holding Pax Msci Eafe or generate 2.25% return on investment over 90 days.

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

Lord Abbett Diversified  vs.  Pax Msci Eafe

Lord Abbett Diversified

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lord Abbett Diversified has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and 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.

Pax Msci Eafe

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Pax Msci Eafe are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Pax Msci 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 Pax Msci

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

The idea behind Lord Abbett Diversified and Pax Msci Eafe 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.