Correlation Between Davis Financial and Lord Abbett

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

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

Diversification Opportunities for Davis Financial and Lord Abbett

0.8

Correlation Coefficient

Davis Financial  Lord Abbett

Very poor diversification

The 3 months correlation between Davis and Lord is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Davis Financial Fund 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 Davis Financial 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 Davis Financial Fund 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 Davis Financial i.e., Davis Financial and Lord Abbett go up and down completely randomly.

Pair Corralation between Davis Financial and Lord Abbett

Assuming the 90 days horizon Davis Financial Fund is expected to under-perform the Lord Abbett. But the mutual fund apears to be less risky and, when comparing its historical volatility, Davis Financial Fund is 1.22 times less risky than Lord Abbett. The mutual fund trades about -0.39 of its potential returns per unit of risk. The Lord Abbett Growth is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  4,045  in Lord Abbett Growth on September 24, 2024 and sell it today you would earn a total of  62.00  from holding Lord Abbett Growth or generate 1.53% return on investment over 90 days.

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

Davis Financial Fund  vs.  Lord Abbett Growth

Davis Financial

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Davis Financial Fund 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, Davis Financial 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

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lord Abbett Growth are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Lord Abbett showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Davis Financial and Lord Abbett

The main advantage of trading using opposite Davis Financial and Lord Abbett positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Davis Financial 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 Davis Financial Fund 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.

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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 Commodity Directory module to find actively traded commodities issued by global exchanges.