Correlation Between Abbott Laboratories and Boston Scientific
Can any of the company-specific risk be diversified away by investing in both Abbott Laboratories and Boston Scientific 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 Abbott Laboratories and Boston Scientific into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Abbott Laboratories and Boston Scientific, you can compare the effects of market volatilities on Abbott Laboratories and Boston Scientific 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 Abbott Laboratories with a short position of Boston Scientific. Check out your portfolio center. Please also check ongoing floating volatility patterns of Abbott Laboratories and Boston Scientific.
Diversification Opportunities for Abbott Laboratories and Boston Scientific
-0.01 | Correlation Coefficient |
Good diversification
The 3 months correlation between Abbott and Boston is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Abbott Laboratories and Boston Scientific in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boston Scientific and Abbott Laboratories 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 Abbott Laboratories are associated (or correlated) with Boston Scientific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boston Scientific has no effect on the direction of Abbott Laboratories i.e., Abbott Laboratories and Boston Scientific go up and down completely randomly.
Pair Corralation between Abbott Laboratories and Boston Scientific
Assuming the 90 days trading horizon Abbott Laboratories is expected to generate 8.03 times less return on investment than Boston Scientific. But when comparing it to its historical volatility, Abbott Laboratories is 2.31 times less risky than Boston Scientific. It trades about 0.07 of its potential returns per unit of risk. Boston Scientific is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 8,650 in Boston Scientific on October 13, 2024 and sell it today you would earn a total of 750.00 from holding Boston Scientific or generate 8.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 94.44% |
| Values | Daily Returns |
Abbott Laboratories vs. Boston Scientific
Performance |
| Timeline |
| Abbott Laboratories |
| Boston Scientific |
Abbott Laboratories and Boston Scientific Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Abbott Laboratories and Boston Scientific
The main advantage of trading using opposite Abbott Laboratories and Boston Scientific positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Abbott Laboratories position performs unexpectedly, Boston Scientific 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 Boston Scientific will offset losses from the drop in Boston Scientific's long position.| Abbott Laboratories vs. Spirent Communications plc | Abbott Laboratories vs. Charter Communications | Abbott Laboratories vs. Singapore Reinsurance | Abbott Laboratories vs. Zurich Insurance Group |
| Boston Scientific vs. Abbott Laboratories | Boston Scientific vs. Medtronic PLC | Boston Scientific vs. Stryker | Boston Scientific vs. Becton Dickinson and |
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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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