Correlation Between Vanguard Small-cap and Lord Abbett

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Can any of the company-specific risk be diversified away by investing in both Vanguard Small-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 Vanguard Small-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 Vanguard Small Cap Growth and Lord Abbett Alpha, you can compare the effects of market volatilities on Vanguard Small-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 Vanguard Small-cap with a short position of Lord Abbett. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Small-cap and Lord Abbett.

Diversification Opportunities for Vanguard Small-cap and Lord Abbett

0.94
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Vanguard and Lord is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding VANGUARD SMALL-CAP GROWTH and LORD ABBETT ALPHA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lord Abbett Alpha and Vanguard Small-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 Vanguard Small Cap 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 Alpha has no effect on the direction of Vanguard Small-cap i.e., Vanguard Small-cap and Lord Abbett go up and down completely randomly.

Pair Corralation between Vanguard Small-cap and Lord Abbett

Assuming the 90 days horizon Vanguard Small Cap Growth is expected to generate 1.18 times more return on investment than Lord Abbett. However, Vanguard Small-cap is 1.18 times more volatile than Lord Abbett Alpha. It trades about 0.16 of its potential returns per unit of risk. Lord Abbett Alpha is currently generating about 0.18 per unit of risk. If you would invest  7,087  in Vanguard Small Cap Growth on December 29, 2023 and sell it today you would earn a total of  223.00  from holding Vanguard Small Cap Growth or generate 3.15% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

VANGUARD SMALL-CAP GROWTH  vs.  LORD ABBETT ALPHA

 Performance 
       Timeline  
Vanguard Small-cap Growth 

Risk-Adjusted Performance

8 of 100

 
Low
 
High
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Small Cap Growth are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly fragile technical and fundamental indicators, Vanguard Small-cap may actually be approaching a critical reversion point that can send shares even higher in April 2024.
Lord Abbett Alpha 

Risk-Adjusted Performance

9 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Lord Abbett Alpha are ranked lower than 9 (%) 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.

Vanguard Small-cap and Lord Abbett Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Vanguard Small-cap and Lord Abbett

The main advantage of trading using opposite Vanguard Small-cap and Lord Abbett positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Small-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 Vanguard Small Cap Growth and Lord Abbett Alpha 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.

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