Correlation Between Vanguard Short-term and Lord Abbett

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

By analyzing existing cross correlation between Vanguard Short Term Investment Grade and Lord Abbett Short, you can compare the effects of market volatilities on Vanguard Short-term 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 Vanguard Short-term with a short position of Lord Abbett. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Short-term and Lord Abbett.

Diversification Opportunities for Vanguard Short-term and Lord Abbett

0.53

Correlation Coefficient

Vanguard Short-term  Lord Abbett

Very weak diversification

The 3 months correlation between Vanguard and Lord is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Short Term Investment and Lord Abbett Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lord Abbett Short and Vanguard Short-term 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 Vanguard Short Term Investment Grade 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 Short has no effect on the direction of Vanguard Short-term i.e., Vanguard Short-term and Lord Abbett go up and down completely randomly.

Pair Corralation between Vanguard Short-term and Lord Abbett

Assuming the 90 days horizon Vanguard Short-term is expected to generate 42.0 times less return on investment than Lord Abbett. But when comparing it to its historical volatility, Vanguard Short Term Investment Grade is 1.07 times less risky than Lord Abbett. It trades about 0.0 of its potential returns per unit of risk. Lord Abbett Short is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  386.00  in Lord Abbett Short on August 31, 2024 and sell it today you would earn a total of  1.00  from holding Lord Abbett Short or generate 0.26% return on investment over 90 days.

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

Vanguard Short Term Investment  vs.  Lord Abbett Short

Vanguard Short Term

Risk-Adjusted Performance

0 of 100

Very Weak

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

Lord Abbett Short

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lord Abbett Short are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental 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 Vanguard Short-term and Lord Abbett

The main advantage of trading using opposite Vanguard Short-term and Lord Abbett positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Short-term 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 Vanguard Short Term Investment Grade and Lord Abbett Short 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.