Correlation Between Lord Abbett and Banks Ultrasector

Can any of the company-specific risk be diversified away by investing in both Lord Abbett and Banks Ultrasector 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 Banks Ultrasector 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 Banks Ultrasector Profund, you can compare the effects of market volatilities on Lord Abbett and Banks Ultrasector 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 Banks Ultrasector. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lord Abbett and Banks Ultrasector.

Diversification Opportunities for Lord Abbett and Banks Ultrasector

0.42

Correlation Coefficient

Lord Abbett  Banks Ultrasector

Very weak diversification

The 3 months correlation between Lord and BANKS is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Lord Abbett Small and Banks Ultrasector Profund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banks Ultrasector 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 Small are associated (or correlated) with Banks Ultrasector. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banks Ultrasector Profund has no effect on the direction of Lord Abbett i.e., Lord Abbett and Banks Ultrasector go up and down completely randomly.

Pair Corralation between Lord Abbett and Banks Ultrasector

Assuming the 90 days horizon Lord Abbett Small is expected to under-perform the Banks Ultrasector. But the mutual fund apears to be less risky and, when comparing its historical volatility, Lord Abbett Small is 1.9 times less risky than Banks Ultrasector. The mutual fund trades about -0.13 of its potential returns per unit of risk. The Banks Ultrasector Profund is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  5,877  in Banks Ultrasector Profund on December 19, 2024 and sell it today you would lose (321.00) from holding Banks Ultrasector Profund or give up 5.46% of portfolio value over 90 days.

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

Lord Abbett Small  vs.  Banks Ultrasector Profund

Lord Abbett Small

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lord Abbett Small has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Banks Ultrasector Profund

Risk-Adjusted Performance

Very Weak

Over the last 90 days Banks Ultrasector Profund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Banks Ultrasector 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 Banks Ultrasector

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

The idea behind Lord Abbett Small and Banks Ultrasector Profund 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.