Correlation Between Lord Abbett and Ultramid Cap

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

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

Diversification Opportunities for Lord Abbett and Ultramid Cap

0.74

Correlation Coefficient

Lord Abbett  Ultramid Cap

Poor diversification

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

Pair Corralation between Lord Abbett and Ultramid Cap

Assuming the 90 days horizon Lord Abbett Micro Cap is expected to generate 0.51 times more return on investment than Ultramid Cap. However, Lord Abbett Micro Cap is 1.95 times less risky than Ultramid Cap. It trades about -0.34 of its potential returns per unit of risk. Ultramid Cap Profund Ultramid Cap is currently generating about -0.35 per unit of risk. If you would invest  3,186  in Lord Abbett Micro Cap on October 1, 2024 and sell it today you would lose (220.00) from holding Lord Abbett Micro Cap or give up 6.91% of portfolio value over 90 days.

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

Lord Abbett Micro Cap  vs.  Ultramid Cap Profund Ultramid

Lord Abbett Micro

Risk-Adjusted Performance

0 of 100

Very Weak

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

Ultramid Cap Profund

Risk-Adjusted Performance

1 of 100

Weak

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

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

The idea behind Lord Abbett Micro Cap and Ultramid Cap Profund Ultramid 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.