Correlation Between General American and Lord Abbett

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

Diversification Opportunities for General American and Lord Abbett

0.66
  Correlation Coefficient

Poor diversification

The 3 months correlation between General and Lord is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding General American Investors 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 General American 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 General American Investors 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 General American i.e., General American and Lord Abbett go up and down completely randomly.

Pair Corralation between General American and Lord Abbett

Assuming the 90 days horizon General American Investors is expected to generate 5.01 times more return on investment than Lord Abbett. However, General American is 5.01 times more volatile than Lord Abbett Short. It trades about 0.05 of its potential returns per unit of risk. Lord Abbett Short is currently generating about 0.05 per unit of risk. If you would invest  4,637  in General American Investors on December 29, 2023 and sell it today you would earn a total of  1,054  from holding General American Investors or generate 22.73% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

General American Investors  vs.  LORD ABBETT SHORT

 Performance 
       Timeline  
General American Inv 

Risk-Adjusted Performance

18 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in General American Investors are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak primary indicators, General American may actually be approaching a critical reversion point that can send shares even higher in April 2024.
Lord Abbett Short 

Risk-Adjusted Performance

7 of 100

 
Low
 
High
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 current stock price disturbance, may contribute to short-term losses for the investors.

General American and Lord Abbett Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with General American and Lord Abbett

The main advantage of trading using opposite General American and Lord Abbett positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if General American 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 General American Investors 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.
Check out your portfolio center.
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.

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