Correlation Between Technology Ultrasector and Lord Abbett

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

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

Diversification Opportunities for Technology Ultrasector and Lord Abbett

0.54

Correlation Coefficient

Technology Ultrasector  Lord Abbett

Very weak diversification

The 3 months correlation between Technology and Lord is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Technology Ultrasector Profund and Lord Abbett Focused in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lord Abbett Focused and Technology Ultrasector 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 Technology Ultrasector Profund 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 Focused has no effect on the direction of Technology Ultrasector i.e., Technology Ultrasector and Lord Abbett go up and down completely randomly.

Pair Corralation between Technology Ultrasector and Lord Abbett

Assuming the 90 days horizon Technology Ultrasector Profund is expected to under-perform the Lord Abbett. In addition to that, Technology Ultrasector is 1.77 times more volatile than Lord Abbett Focused. It trades about -0.2 of its total potential returns per unit of risk. Lord Abbett Focused is currently generating about -0.01 per unit of volatility. If you would invest  3,714  in Lord Abbett Focused on October 5, 2024 and sell it today you would lose (23.00) from holding Lord Abbett Focused or give up 0.62% of portfolio value over 90 days.

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

Technology Ultrasector Profund  vs.  Lord Abbett Focused

Technology Ultrasector

Risk-Adjusted Performance

0 of 100

Very Weak

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

Lord Abbett Focused

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lord Abbett Focused are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Lord Abbett showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Technology Ultrasector and Lord Abbett

The main advantage of trading using opposite Technology Ultrasector and Lord Abbett positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Technology Ultrasector 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 Technology Ultrasector Profund and Lord Abbett Focused 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.