Correlation Between Live Oak and Lord Abbett

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

By analyzing existing cross correlation between Live Oak Health and Lord Abbett Health, you can compare the effects of market volatilities on Live Oak and Lord Abbett 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 Live Oak with a short position of Lord Abbett. Check out your portfolio center. Please also check ongoing floating volatility patterns of Live Oak and Lord Abbett.

Diversification Opportunities for Live Oak and Lord Abbett

0.81

Correlation Coefficient

Live Oak  Lord Abbett

Very poor diversification

The 3 months correlation between LIVE and Lord is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Live Oak Health and Lord Abbett Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lord Abbett Health and Live Oak 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 Live Oak Health are associated (or correlated) with Lord Abbett. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lord Abbett Health has no effect on the direction of Live Oak i.e., Live Oak and Lord Abbett go up and down completely randomly.

Pair Corralation between Live Oak and Lord Abbett

Assuming the 90 days horizon Live Oak is expected to generate 1.78 times less return on investment than Lord Abbett. But when comparing it to its historical volatility, Live Oak Health is 1.31 times less risky than Lord Abbett. It trades about 0.03 of its potential returns per unit of risk. Lord Abbett Health is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,618  in Lord Abbett Health on November 28, 2024 and sell it today you would earn a total of  264.00  from holding Lord Abbett Health or generate 16.32% return on investment over 90 days.

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

Live Oak Health  vs.  Lord Abbett Health

Live Oak Health

Risk-Adjusted Performance

Very Weak

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

Lord Abbett Health

Risk-Adjusted Performance

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.

Pair Trading with Live Oak and Lord Abbett

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

The idea behind Live Oak Health and Lord Abbett Health 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.