Correlation Between Old Westbury and Lord Abbett

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

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

Diversification Opportunities for Old Westbury and Lord Abbett

0.01

Correlation Coefficient

Old Westbury  Lord Abbett

Significant diversification

The 3 months correlation between Old and Lord is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Old Westbury Small and Lord Abbett Intermediate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lord Abbett Intermediate and Old Westbury 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 Old Westbury Small 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 Intermediate has no effect on the direction of Old Westbury i.e., Old Westbury and Lord Abbett go up and down completely randomly.

Pair Corralation between Old Westbury and Lord Abbett

Assuming the 90 days horizon Old Westbury Small is expected to under-perform the Lord Abbett. In addition to that, Old Westbury is 4.47 times more volatile than Lord Abbett Intermediate. It trades about -0.01 of its total potential returns per unit of risk. Lord Abbett Intermediate is currently generating about 0.06 per unit of volatility. If you would invest  1,010  in Lord Abbett Intermediate on December 26, 2024 and sell it today you would earn a total of  7.00  from holding Lord Abbett Intermediate or generate 0.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Old Westbury Small  vs.  Lord Abbett Intermediate

Old Westbury Small

Risk-Adjusted Performance

Very Weak

Over the last 90 days Old Westbury Small has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong primary indicators, Old Westbury is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Lord Abbett Intermediate

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Lord Abbett Intermediate are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. 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.

Pair Trading with Old Westbury and Lord Abbett

The main advantage of trading using opposite Old Westbury and Lord Abbett positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Old Westbury 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 Old Westbury Small and Lord Abbett Intermediate 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.