Correlation Between Lord Abbett and Columbia Limited

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

By analyzing existing cross correlation between Lord Abbett Short and Columbia Limited Duration, you can compare the effects of market volatilities on Lord Abbett and Columbia Limited 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 Columbia Limited. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lord Abbett and Columbia Limited.

Diversification Opportunities for Lord Abbett and Columbia Limited

0.75

Correlation Coefficient

Lord Abbett  Columbia Limited

Poor diversification

The 3 months correlation between Lord and Columbia is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Lord Abbett Short and Columbia Limited Duration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Limited Duration 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 Short are associated (or correlated) with Columbia Limited. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Limited Duration has no effect on the direction of Lord Abbett i.e., Lord Abbett and Columbia Limited go up and down completely randomly.

Pair Corralation between Lord Abbett and Columbia Limited

Assuming the 90 days horizon Lord Abbett is expected to generate 1.18 times less return on investment than Columbia Limited. But when comparing it to its historical volatility, Lord Abbett Short is 1.16 times less risky than Columbia Limited. It trades about 0.1 of its potential returns per unit of risk. Columbia Limited Duration is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  919.00  in Columbia Limited Duration on February 14, 2024 and sell it today you would earn a total of  47.00  from holding Columbia Limited Duration or generate 5.11% return on investment over 90 days.

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

Lord Abbett Short  vs.  Columbia Limited Duration

Lord Abbett Short

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lord Abbett Short are ranked lower than 7 (%) 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 recent stock price disturbance, may contribute to short-term losses for the investors.

Columbia Limited Duration

Risk-Adjusted Performance

7 of 100

OK

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

Pair Trading with Lord Abbett and Columbia Limited

The main advantage of trading using opposite Lord Abbett and Columbia Limited positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lord Abbett position performs unexpectedly, Columbia Limited 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 Columbia Limited will offset losses from the drop in Columbia Limited's long position.

The idea behind Lord Abbett Short and Columbia Limited Duration 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.