Correlation Between Lord Abbett and Tax-managed

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

Diversification Opportunities for Lord Abbett and Tax-managed

0.75

Correlation Coefficient

Lord Abbett  Tax-managed

Poor diversification

The 3 months correlation between Lord and Tax-managed is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Lord Abbett Small and Tax Managed Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tax Managed Large 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 Tax-managed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tax Managed Large has no effect on the direction of Lord Abbett i.e., Lord Abbett and Tax-managed go up and down completely randomly.

Pair Corralation between Lord Abbett and Tax-managed

Assuming the 90 days horizon Lord Abbett Small is expected to under-perform the Tax-managed. In addition to that, Lord Abbett is 2.23 times more volatile than Tax Managed Large Cap. It trades about -0.32 of its total potential returns per unit of risk. Tax Managed Large Cap is currently generating about -0.16 per unit of volatility. If you would invest  8,791  in Tax Managed Large Cap on October 9, 2024 and sell it today you would lose (293.00) from holding Tax Managed Large Cap or give up 3.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.0%
Values	Daily Returns

Lord Abbett Small  vs.  Tax Managed Large Cap

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.

Tax Managed Large

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Tax Managed Large Cap are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Tax-managed 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 Tax-managed

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

The idea behind Lord Abbett Small and Tax Managed Large Cap 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.