Correlation Between Abbott Laboratories and Stryker
Can any of the company-specific risk be diversified away by investing in both Abbott Laboratories and Stryker 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 Stryker into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Abbott Laboratories and Stryker, you can compare the effects of market volatilities on Abbott Laboratories and Stryker 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 Stryker. Check out your portfolio center. Please also check ongoing floating volatility patterns of Abbott Laboratories and Stryker.
Diversification Opportunities for Abbott Laboratories and Stryker
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Abbott and Stryker is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Abbott Laboratories and Stryker in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stryker 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 Stryker. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stryker has no effect on the direction of Abbott Laboratories i.e., Abbott Laboratories and Stryker go up and down completely randomly.
Pair Corralation between Abbott Laboratories and Stryker
Assuming the 90 days trading horizon Abbott Laboratories is expected to generate 1.37 times less return on investment than Stryker. But when comparing it to its historical volatility, Abbott Laboratories is 1.18 times less risky than Stryker. It trades about 0.14 of its potential returns per unit of risk. Stryker is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 32,290 in Stryker on August 29, 2024 and sell it today you would earn a total of 4,830 from holding Stryker or generate 14.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Abbott Laboratories vs. Stryker
Performance |
| Timeline |
| Abbott Laboratories |
| Stryker |
Abbott Laboratories and Stryker Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Abbott Laboratories and Stryker
The main advantage of trading using opposite Abbott Laboratories and Stryker positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Abbott Laboratories position performs unexpectedly, Stryker 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 Stryker will offset losses from the drop in Stryker's long position.| Abbott Laboratories vs. Superior Plus Corp | Abbott Laboratories vs. NMI Holdings | Abbott Laboratories vs. Origin Agritech | Abbott Laboratories vs. SIVERS SEMICONDUCTORS AB |
| Stryker vs. Superior Plus Corp | Stryker vs. NMI Holdings | Stryker vs. Origin Agritech | Stryker vs. SIVERS SEMICONDUCTORS AB |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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