Correlation Between Small Midcap and Lord Abbett

Can any of the company-specific risk be diversified away by investing in both Small Midcap 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 Midcap 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 Midcap Dividend Income and Lord Abbett Short, you can compare the effects of market volatilities on Small Midcap 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 Midcap with a short position of Lord Abbett. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Midcap and Lord Abbett.

Diversification Opportunities for Small Midcap and Lord Abbett

0.59

Correlation Coefficient

Small Midcap  Lord Abbett

Very weak diversification

The 3 months correlation between Small and Lord is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Small Midcap Dividend Income and Lord Abbett Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lord Abbett Short and Small Midcap 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 Midcap Dividend Income 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 Short has no effect on the direction of Small Midcap i.e., Small Midcap and Lord Abbett go up and down completely randomly.

Pair Corralation between Small Midcap and Lord Abbett

Assuming the 90 days horizon Small Midcap Dividend Income is expected to under-perform the Lord Abbett. In addition to that, Small Midcap is 7.46 times more volatile than Lord Abbett Short. It trades about -0.35 of its total potential returns per unit of risk. Lord Abbett Short is currently generating about -0.36 per unit of volatility. If you would invest  1,000.00  in Lord Abbett Short on October 9, 2024 and sell it today you would lose (12.00) from holding Lord Abbett Short or give up 1.2% of portfolio value over 90 days.

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

Small Midcap Dividend Income  vs.  Lord Abbett Short

Small Midcap Dividend

Risk-Adjusted Performance

0 of 100

Very Weak

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

Lord Abbett Short

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lord Abbett Short are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental 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 Small Midcap and Lord Abbett

The main advantage of trading using opposite Small Midcap and Lord Abbett positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Midcap 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 Midcap Dividend Income and Lord Abbett Short 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.