Correlation Between Vulcan Value and Lord Abbett

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

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

Diversification Opportunities for Vulcan Value and Lord Abbett

0.71

Correlation Coefficient

Vulcan Value  Lord Abbett

Poor diversification

The 3 months correlation between Vulcan and Lord is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Vulcan Value Partners and Lord Abbett Convertible in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lord Abbett Convertible and Vulcan Value 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 Vulcan Value Partners 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 Convertible has no effect on the direction of Vulcan Value i.e., Vulcan Value and Lord Abbett go up and down completely randomly.

Pair Corralation between Vulcan Value and Lord Abbett

Assuming the 90 days horizon Vulcan Value is expected to generate 3.4 times less return on investment than Lord Abbett. In addition to that, Vulcan Value is 1.35 times more volatile than Lord Abbett Convertible. It trades about 0.03 of its total potential returns per unit of risk. Lord Abbett Convertible is currently generating about 0.14 per unit of volatility. If you would invest  1,376  in Lord Abbett Convertible on September 25, 2024 and sell it today you would earn a total of  77.00  from holding Lord Abbett Convertible or generate 5.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Vulcan Value Partners  vs.  Lord Abbett Convertible

Vulcan Value Partners

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Vulcan Value Partners are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong essential indicators, Vulcan Value is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Lord Abbett Convertible

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lord Abbett Convertible are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. 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 Vulcan Value and Lord Abbett

The main advantage of trading using opposite Vulcan Value and Lord Abbett positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vulcan Value 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 Vulcan Value Partners and Lord Abbett Convertible 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.