Correlation Between Principal Lifetime and Lord Abbett

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

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

Diversification Opportunities for Principal Lifetime and Lord Abbett

0.51

Correlation Coefficient

Principal Lifetime  Lord Abbett

Very weak diversification

The 3 months correlation between Principal and Lord is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Principal Lifetime Hybrid and Lord Abbett Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lord Abbett Growth and Principal Lifetime 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 Principal Lifetime Hybrid 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 Growth has no effect on the direction of Principal Lifetime i.e., Principal Lifetime and Lord Abbett go up and down completely randomly.

Pair Corralation between Principal Lifetime and Lord Abbett

Assuming the 90 days horizon Principal Lifetime Hybrid is expected to generate 0.51 times more return on investment than Lord Abbett. However, Principal Lifetime Hybrid is 1.98 times less risky than Lord Abbett. It trades about -0.34 of its potential returns per unit of risk. Lord Abbett Growth is currently generating about -0.2 per unit of risk. If you would invest  1,551  in Principal Lifetime Hybrid on October 4, 2024 and sell it today you would lose (93.00) from holding Principal Lifetime Hybrid or give up 6.0% of portfolio value over 90 days.

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

Principal Lifetime Hybrid  vs.  Lord Abbett Growth

Principal Lifetime Hybrid

Risk-Adjusted Performance

0 of 100

Very Weak

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

Lord Abbett Growth

Risk-Adjusted Performance

7 of 100

OK

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

Pair Trading with Principal Lifetime and Lord Abbett

The main advantage of trading using opposite Principal Lifetime and Lord Abbett positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Principal Lifetime 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 Principal Lifetime Hybrid and Lord Abbett Growth 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.

Check out your portfolio center.

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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.