Correlation Between Small Company and Lord Abbett

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

By analyzing existing cross correlation between Small Pany Growth and Lord Abbett Focused, you can compare the effects of market volatilities on Small Company and Lord Abbett 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 Small Company with a short position of Lord Abbett. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Company and Lord Abbett.

Diversification Opportunities for Small Company and Lord Abbett

0.24

Correlation Coefficient

Small Company  Lord Abbett

Modest diversification

The 3 months correlation between Small and Lord is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Small Pany Growth and Lord Abbett Focused in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lord Abbett Focused and Small Company 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 Small Pany Growth are associated (or correlated) with Lord Abbett. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lord Abbett Focused has no effect on the direction of Small Company i.e., Small Company and Lord Abbett go up and down completely randomly.

Pair Corralation between Small Company and Lord Abbett

Assuming the 90 days horizon Small Pany Growth is expected to generate 1.66 times more return on investment than Lord Abbett. However, Small Company is 1.66 times more volatile than Lord Abbett Focused. It trades about 0.06 of its potential returns per unit of risk. Lord Abbett Focused is currently generating about 0.03 per unit of risk. If you would invest  902.00  in Small Pany Growth on December 1, 2024 and sell it today you would earn a total of  610.00  from holding Small Pany Growth or generate 67.63% return on investment over 90 days.

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

Small Pany Growth  vs.  Lord Abbett Focused

Small Pany Growth

Risk-Adjusted Performance

Very Weak

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

Lord Abbett Focused

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Small Company and Lord Abbett

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

The idea behind Small Pany Growth and Lord Abbett Focused 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.