Correlation Between Abbott Laboratories and Electromedical Technologies
Can any of the company-specific risk be diversified away by investing in both Abbott Laboratories and Electromedical Technologies 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 Electromedical Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Abbott Laboratories and Electromedical Technologies, you can compare the effects of market volatilities on Abbott Laboratories and Electromedical Technologies 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 Electromedical Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Abbott Laboratories and Electromedical Technologies.
Diversification Opportunities for Abbott Laboratories and Electromedical Technologies
-0.21 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Abbott and Electromedical is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Abbott Laboratories and Electromedical Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electromedical Technologies 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 Electromedical Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Electromedical Technologies has no effect on the direction of Abbott Laboratories i.e., Abbott Laboratories and Electromedical Technologies go up and down completely randomly.
Pair Corralation between Abbott Laboratories and Electromedical Technologies
Considering the 90-day investment horizon Abbott Laboratories is expected to generate 23.27 times less return on investment than Electromedical Technologies. But when comparing it to its historical volatility, Abbott Laboratories is 13.68 times less risky than Electromedical Technologies. It trades about 0.02 of its potential returns per unit of risk. Electromedical Technologies is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 0.10 in Electromedical Technologies on September 20, 2024 and sell it today you would lose (0.07) from holding Electromedical Technologies or give up 70.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.6% |
| Values | Daily Returns |
Abbott Laboratories vs. Electromedical Technologies
Performance |
| Timeline |
| Abbott Laboratories |
| Electromedical Technologies |
Abbott Laboratories and Electromedical Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Abbott Laboratories and Electromedical Technologies
The main advantage of trading using opposite Abbott Laboratories and Electromedical Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Abbott Laboratories position performs unexpectedly, Electromedical Technologies 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 Electromedical Technologies will offset losses from the drop in Electromedical Technologies' long position.| Abbott Laboratories vs. AbbVie Inc | Abbott Laboratories vs. Eli Lilly and | Abbott Laboratories vs. Bristol Myers Squibb | Abbott Laboratories vs. Johnson Johnson |
| Electromedical Technologies vs. Abbott Laboratories | Electromedical Technologies vs. Stryker | Electromedical Technologies vs. Boston Scientific Corp | Electromedical Technologies vs. Medtronic PLC |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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