Correlation Between Abbott Laboratories and Cerus
Can any of the company-specific risk be diversified away by investing in both Abbott Laboratories and Cerus 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 Cerus into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Abbott Laboratories and Cerus, you can compare the effects of market volatilities on Abbott Laboratories and Cerus 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 Cerus. Check out your portfolio center. Please also check ongoing floating volatility patterns of Abbott Laboratories and Cerus.
Diversification Opportunities for Abbott Laboratories and Cerus
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Abbott and Cerus is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Abbott Laboratories and Cerus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cerus 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 Cerus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cerus has no effect on the direction of Abbott Laboratories i.e., Abbott Laboratories and Cerus go up and down completely randomly.
Pair Corralation between Abbott Laboratories and Cerus
Considering the 90-day investment horizon Abbott Laboratories is expected to generate 2.52 times less return on investment than Cerus. But when comparing it to its historical volatility, Abbott Laboratories is 4.17 times less risky than Cerus. It trades about 0.12 of its potential returns per unit of risk. Cerus is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 172.00 in Cerus on August 27, 2024 and sell it today you would earn a total of 10.00 from holding Cerus or generate 5.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Abbott Laboratories vs. Cerus
Performance |
| Timeline |
| Abbott Laboratories |
| Cerus |
Abbott Laboratories and Cerus Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Abbott Laboratories and Cerus
The main advantage of trading using opposite Abbott Laboratories and Cerus positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Abbott Laboratories position performs unexpectedly, Cerus 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 Cerus will offset losses from the drop in Cerus' long position.| Abbott Laboratories vs. AbbVie Inc | Abbott Laboratories vs. Eli Lilly and | Abbott Laboratories vs. Bristol Myers Squibb | Abbott Laboratories vs. Johnson Johnson |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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