Correlation Between Stone Ridge and Lord Abbett

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

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

Diversification Opportunities for Stone Ridge and Lord Abbett

0.19

Correlation Coefficient

Stone Ridge  Lord Abbett

Average diversification

The 3 months correlation between Stone and Lord is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Stone Ridge High and Lord Abbett High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lord Abbett High and Stone Ridge 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 Stone Ridge High 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 High has no effect on the direction of Stone Ridge i.e., Stone Ridge and Lord Abbett go up and down completely randomly.

Pair Corralation between Stone Ridge and Lord Abbett

Assuming the 90 days horizon Stone Ridge is expected to generate 1.31 times less return on investment than Lord Abbett. But when comparing it to its historical volatility, Stone Ridge High is 1.52 times less risky than Lord Abbett. It trades about 0.07 of its potential returns per unit of risk. Lord Abbett High is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,082  in Lord Abbett High on October 20, 2024 and sell it today you would earn a total of  3.00  from holding Lord Abbett High or generate 0.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

Stone Ridge High  vs.  Lord Abbett High

Stone Ridge High

Risk-Adjusted Performance

35 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Stone Ridge High are ranked lower than 35 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong primary indicators, Stone Ridge is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Lord Abbett High

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lord Abbett High has generated negative risk-adjusted returns adding no value to fund investors. 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 Stone Ridge and Lord Abbett

The main advantage of trading using opposite Stone Ridge and Lord Abbett positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stone Ridge 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 Stone Ridge High and Lord Abbett High 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.