Correlation Between Lord Abbett and American Century

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

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

Diversification Opportunities for Lord Abbett and American Century

0.89

Correlation Coefficient

Lord Abbett  American Century

Very poor diversification

The 3 months correlation between Lord and American is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Lord Abbett Small and American Century Ultra in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Century Ultra 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 Small are associated (or correlated) with American Century. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Century Ultra has no effect on the direction of Lord Abbett i.e., Lord Abbett and American Century go up and down completely randomly.

Pair Corralation between Lord Abbett and American Century

Assuming the 90 days horizon Lord Abbett is expected to generate 1.34 times less return on investment than American Century. In addition to that, Lord Abbett is 1.24 times more volatile than American Century Ultra. It trades about 0.13 of its total potential returns per unit of risk. American Century Ultra is currently generating about 0.22 per unit of volatility. If you would invest  9,875  in American Century Ultra on September 13, 2024 and sell it today you would earn a total of  1,382  from holding American Century Ultra or generate 13.99% return on investment over 90 days.

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

Lord Abbett Small  vs.  American Century Ultra

Lord Abbett Small

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lord Abbett Small are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Lord Abbett may actually be approaching a critical reversion point that can send shares even higher in January 2025.

American Century Ultra

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in American Century Ultra are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, American Century showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lord Abbett and American Century

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

The idea behind Lord Abbett Small and American Century Ultra 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.