Correlation Between 2G ENERGY and ABB
Can any of the company-specific risk be diversified away by investing in both 2G ENERGY and ABB 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 2G ENERGY and ABB into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between 2G ENERGY and ABB, you can compare the effects of market volatilities on 2G ENERGY and ABB 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 2G ENERGY with a short position of ABB. Check out your portfolio center. Please also check ongoing floating volatility patterns of 2G ENERGY and ABB.
Diversification Opportunities for 2G ENERGY and ABB
Very weak diversification
The 3 months correlation between 2GB and ABB is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding 2G ENERGY and ABB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ABB and 2G ENERGY 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 2G ENERGY are associated (or correlated) with ABB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ABB has no effect on the direction of 2G ENERGY i.e., 2G ENERGY and ABB go up and down completely randomly.
Pair Corralation between 2G ENERGY and ABB
Assuming the 90 days trading horizon 2G ENERGY is expected to generate 4.41 times less return on investment than ABB. In addition to that, 2G ENERGY is 1.11 times more volatile than ABB. It trades about 0.01 of its total potential returns per unit of risk. ABB is currently generating about 0.06 per unit of volatility. If you would invest 5,100 in ABB on September 1, 2024 and sell it today you would earn a total of 150.00 from holding ABB or generate 2.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
2G ENERGY vs. ABB
Performance |
| Timeline |
| 2G ENERGY |
| ABB |
2G ENERGY and ABB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with 2G ENERGY and ABB
The main advantage of trading using opposite 2G ENERGY and ABB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 2G ENERGY position performs unexpectedly, ABB 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 ABB will offset losses from the drop in ABB's long position.| 2G ENERGY vs. Australian Agricultural | 2G ENERGY vs. Ultra Clean Holdings | 2G ENERGY vs. Charter Communications | 2G ENERGY vs. Consolidated Communications Holdings |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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