Correlation Between Lord Abbett and American Beacon

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Can any of the company-specific risk be diversified away by investing in both Lord Abbett and American Beacon 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 Lord Abbett and American Beacon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lord Abbett Affiliated and American Beacon Large, you can compare the effects of market volatilities on Lord Abbett and American Beacon 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 Lord Abbett with a short position of American Beacon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lord Abbett and American Beacon.

Diversification Opportunities for Lord Abbett and American Beacon

0.95
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Lord and American is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding LORD ABBETT AFFILIATED and AMERICAN BEACON LARGE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Beacon Large and Lord Abbett 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 Lord Abbett Affiliated are associated (or correlated) with American Beacon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Beacon Large has no effect on the direction of Lord Abbett i.e., Lord Abbett and American Beacon go up and down completely randomly.

Pair Corralation between Lord Abbett and American Beacon

Assuming the 90 days horizon Lord Abbett Affiliated is expected to generate 1.21 times more return on investment than American Beacon. However, Lord Abbett is 1.21 times more volatile than American Beacon Large. It trades about 0.36 of its potential returns per unit of risk. American Beacon Large is currently generating about 0.43 per unit of risk. If you would invest  1,777  in Lord Abbett Affiliated on December 29, 2023 and sell it today you would earn a total of  70.00  from holding Lord Abbett Affiliated or generate 3.94% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

LORD ABBETT AFFILIATED  vs.  AMERICAN BEACON LARGE

 Performance 
       Timeline  
Lord Abbett Affiliated 

Risk-Adjusted Performance

20 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Lord Abbett Affiliated are ranked lower than 20 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Lord Abbett may actually be approaching a critical reversion point that can send shares even higher in April 2024.
American Beacon Large 

Risk-Adjusted Performance

17 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in American Beacon Large are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, American Beacon may actually be approaching a critical reversion point that can send shares even higher in April 2024.

Lord Abbett and American Beacon Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Lord Abbett and American Beacon

The main advantage of trading using opposite Lord Abbett and American Beacon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lord Abbett position performs unexpectedly, American Beacon 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 American Beacon will offset losses from the drop in American Beacon's long position.
The idea behind Lord Abbett Affiliated and American Beacon Large 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.

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