Correlation Between Baron International and Lord Abbett

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

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

Diversification Opportunities for Baron International and Lord Abbett

0.79

Correlation Coefficient

Baron International  Lord Abbett

Poor diversification

The 3 months correlation between Baron and Lord is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Baron International Growth and Lord Abbett Affiliated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lord Abbett Affiliated and Baron International 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 Baron International Growth 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 Affiliated has no effect on the direction of Baron International i.e., Baron International and Lord Abbett go up and down completely randomly.

Pair Corralation between Baron International and Lord Abbett

Assuming the 90 days horizon Baron International is expected to generate 1.68 times less return on investment than Lord Abbett. In addition to that, Baron International is 1.14 times more volatile than Lord Abbett Affiliated. It trades about 0.09 of its total potential returns per unit of risk. Lord Abbett Affiliated is currently generating about 0.18 per unit of volatility. If you would invest  1,589  in Lord Abbett Affiliated on February 24, 2024 and sell it today you would earn a total of  232.00  from holding Lord Abbett Affiliated or generate 14.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.2%
Values	Daily Returns

Baron International Growth  vs.  Lord Abbett Affiliated

Baron International

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Baron International Growth are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Baron International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Lord Abbett Affiliated

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Lord Abbett Affiliated are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and 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 Baron International and Lord Abbett

The main advantage of trading using opposite Baron International and Lord Abbett positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Baron International 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 Baron International Growth and Lord Abbett Affiliated 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.