Correlation Between Lord Abbett and Ab Municipal

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

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

Diversification Opportunities for Lord Abbett and Ab Municipal

0.83

Correlation Coefficient

Lord Abbett  Ab Municipal

Very poor diversification

The 3 months correlation between Lord and AUNCX is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Lord Abbett Intermediate and Ab Municipal Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ab Municipal Bond 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 Intermediate are associated (or correlated) with Ab Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ab Municipal Bond has no effect on the direction of Lord Abbett i.e., Lord Abbett and Ab Municipal go up and down completely randomly.

Pair Corralation between Lord Abbett and Ab Municipal

Assuming the 90 days horizon Lord Abbett Intermediate is expected to under-perform the Ab Municipal. But the mutual fund apears to be less risky and, when comparing its historical volatility, Lord Abbett Intermediate is 1.11 times less risky than Ab Municipal. The mutual fund trades about -0.33 of its potential returns per unit of risk. The Ab Municipal Bond is currently generating about -0.17 of returns per unit of risk over similar time horizon. If you would invest  1,082  in Ab Municipal Bond on October 10, 2024 and sell it today you would lose (9.00) from holding Ab Municipal Bond or give up 0.83% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.24%
Values	Daily Returns

Lord Abbett Intermediate  vs.  Ab Municipal Bond

Lord Abbett Intermediate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lord Abbett Intermediate 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.

Ab Municipal Bond

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ab Municipal Bond has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Ab Municipal 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 Ab Municipal

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

The idea behind Lord Abbett Intermediate and Ab Municipal Bond 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.

Check out your portfolio center.

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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.