Correlation Between Lord Abbett and Fidelity Advisor

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

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

Diversification Opportunities for Lord Abbett and Fidelity Advisor

0.67

Correlation Coefficient

Lord Abbett  Fidelity Advisor

Poor diversification

The 3 months correlation between Lord and Fidelity is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Lord Abbett Health and Fidelity Advisor Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Advisor Health 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 Health are associated (or correlated) with Fidelity Advisor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Advisor Health has no effect on the direction of Lord Abbett i.e., Lord Abbett and Fidelity Advisor go up and down completely randomly.

Pair Corralation between Lord Abbett and Fidelity Advisor

Assuming the 90 days horizon Lord Abbett Health is expected to generate 1.09 times more return on investment than Fidelity Advisor. However, Lord Abbett is 1.09 times more volatile than Fidelity Advisor Health. It trades about 0.17 of its potential returns per unit of risk. Fidelity Advisor Health is currently generating about 0.02 per unit of risk. If you would invest  1,933  in Lord Abbett Health on August 12, 2024 and sell it today you would earn a total of  63.00  from holding Lord Abbett Health or generate 3.26% return on investment over 90 days.

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

Lord Abbett Health  vs.  Fidelity Advisor Health

Lord Abbett Health

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lord Abbett Health are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong 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.

Fidelity Advisor Health

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Advisor Health are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Fidelity Advisor may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Lord Abbett and Fidelity Advisor

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

The idea behind Lord Abbett Health and Fidelity Advisor Health 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.