Correlation Between Capital World and L Abbett

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

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

Diversification Opportunities for Capital World and L Abbett

0.51

Correlation Coefficient

Capital World  L Abbett

Very weak diversification

The 3 months correlation between Capital and LGLSX is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Capital World Growth and L Abbett Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on L Abbett Growth and Capital World 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 Capital World Growth are associated (or correlated) with L Abbett. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of L Abbett Growth has no effect on the direction of Capital World i.e., Capital World and L Abbett go up and down completely randomly.

Pair Corralation between Capital World and L Abbett

Assuming the 90 days horizon Capital World Growth is expected to generate 0.41 times more return on investment than L Abbett. However, Capital World Growth is 2.46 times less risky than L Abbett. It trades about 0.0 of its potential returns per unit of risk. L Abbett Growth is currently generating about -0.1 per unit of risk. If you would invest  6,351  in Capital World Growth on December 29, 2024 and sell it today you would lose (10.00) from holding Capital World Growth or give up 0.16% of portfolio value over 90 days.

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

Capital World Growth  vs.  L Abbett Growth

Capital World Growth

Risk-Adjusted Performance

Very Weak

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

L Abbett Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days L Abbett Growth has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Capital World and L Abbett

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

The idea behind Capital World Growth and L 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.