Correlation Between Large Cap and Lord Abbett

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

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

Diversification Opportunities for Large Cap and Lord Abbett

0.17

Correlation Coefficient

Large Cap  Lord Abbett

Average diversification

The 3 months correlation between Large and Lord is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Large Cap Fund 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 Large Cap 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 Large Cap Fund 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 Large Cap i.e., Large Cap and Lord Abbett go up and down completely randomly.

Pair Corralation between Large Cap and Lord Abbett

Assuming the 90 days horizon Large Cap Fund is expected to under-perform the Lord Abbett. In addition to that, Large Cap is 6.83 times more volatile than Lord Abbett Short. It trades about -0.01 of its total potential returns per unit of risk. Lord Abbett Short is currently generating about 0.07 per unit of volatility. If you would invest  382.00  in Lord Abbett Short on February 24, 2025 and sell it today you would earn a total of  4.00  from holding Lord Abbett Short or generate 1.05% return on investment over 90 days.

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

Large Cap Fund  vs.  Lord Abbett Short

Large Cap Fund

Risk-Adjusted Performance

Very Weak

Over the last 90 days Large Cap Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Large Cap 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

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Lord Abbett Short are ranked lower than 5 (%) 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 Large Cap and Lord Abbett

The main advantage of trading using opposite Large Cap and Lord Abbett positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Large Cap 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 Large Cap Fund 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.