Correlation Between Visa and Lord Abbett

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

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

Diversification Opportunities for Visa and Lord Abbett

0.3

Correlation Coefficient

Visa  Lord Abbett

Weak diversification

The 3 months correlation between Visa and Lord is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Lord Abbett Micro Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lord Abbett Micro and Visa 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 Visa Class A 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 Micro has no effect on the direction of Visa i.e., Visa and Lord Abbett go up and down completely randomly.

Pair Corralation between Visa and Lord Abbett

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.93 times more return on investment than Lord Abbett. However, Visa Class A is 1.07 times less risky than Lord Abbett. It trades about 0.04 of its potential returns per unit of risk. Lord Abbett Micro Cap is currently generating about -0.34 per unit of risk. If you would invest  31,665  in Visa Class A on October 1, 2024 and sell it today you would earn a total of  201.00  from holding Visa Class A or generate 0.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Visa Class A  vs.  Lord Abbett Micro Cap

Visa Class A

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Visa showed solid returns over the last few months and may actually be approaching a breakup point.

Lord Abbett Micro

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lord Abbett Micro Cap 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 Visa and Lord Abbett

The main advantage of trading using opposite Visa and Lord Abbett positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa 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 Visa Class A and Lord Abbett Micro Cap 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.