Correlation Between Sierra Core and L Abbett

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

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

Diversification Opportunities for Sierra Core and L Abbett

0.3

Correlation Coefficient

Sierra Core  L Abbett

Weak diversification

The 3 months correlation between Sierra and LGLSX is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Sierra E Retirement 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 Sierra Core 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 Sierra E Retirement 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 Sierra Core i.e., Sierra Core and L Abbett go up and down completely randomly.

Pair Corralation between Sierra Core and L Abbett

Assuming the 90 days horizon Sierra E Retirement is expected to under-perform the L Abbett. But the mutual fund apears to be less risky and, when comparing its historical volatility, Sierra E Retirement is 3.16 times less risky than L Abbett. The mutual fund trades about -0.14 of its potential returns per unit of risk. The L Abbett Growth is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  4,707  in L Abbett Growth on October 11, 2024 and sell it today you would earn a total of  109.00  from holding L Abbett Growth or generate 2.32% return on investment over 90 days.

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

Sierra E Retirement  vs.  L Abbett Growth

Sierra E Retirement

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sierra E Retirement has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Sierra Core 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

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in L Abbett Growth are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, L Abbett showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sierra Core and L Abbett

The main advantage of trading using opposite Sierra Core and L Abbett positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sierra Core 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 Sierra E Retirement 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..