Correlation Between Lord Abbett and Blackrock Advantage

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

Diversification Opportunities for Lord Abbett and Blackrock Advantage

0.8

Correlation Coefficient

Lord Abbett  Blackrock Advantage

Very poor diversification

The 3 months correlation between Lord and BlackRock is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Lord Abbett Small and Blackrock Advantage Total in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blackrock Advantage Total 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 Blackrock Advantage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blackrock Advantage Total has no effect on the direction of Lord Abbett i.e., Lord Abbett and Blackrock Advantage go up and down completely randomly.

Pair Corralation between Lord Abbett and Blackrock Advantage

Assuming the 90 days horizon Lord Abbett is expected to generate 1.24 times less return on investment than Blackrock Advantage. In addition to that, Lord Abbett is 1.05 times more volatile than Blackrock Advantage Total. It trades about 0.17 of its total potential returns per unit of risk. Blackrock Advantage Total is currently generating about 0.22 per unit of volatility. If you would invest  2,991  in Blackrock Advantage Total on October 25, 2024 and sell it today you would earn a total of  112.00  from holding Blackrock Advantage Total or generate 3.74% 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.  Blackrock Advantage Total

Lord Abbett Small

Risk-Adjusted Performance

0 of 100

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 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.

Blackrock Advantage Total

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Blackrock Advantage Total are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Blackrock Advantage may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Lord Abbett and Blackrock Advantage

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

The idea behind Lord Abbett Small and Blackrock Advantage Total 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.