Correlation Between Abbott Laboratories and Penumbra
Can any of the company-specific risk be diversified away by investing in both Abbott Laboratories and Penumbra 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 Penumbra into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Abbott Laboratories and Penumbra, you can compare the effects of market volatilities on Abbott Laboratories and Penumbra 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 Penumbra. Check out your portfolio center. Please also check ongoing floating volatility patterns of Abbott Laboratories and Penumbra.
Diversification Opportunities for Abbott Laboratories and Penumbra
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Abbott and Penumbra is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Abbott Laboratories and Penumbra in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Penumbra 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 Penumbra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Penumbra has no effect on the direction of Abbott Laboratories i.e., Abbott Laboratories and Penumbra go up and down completely randomly.
Pair Corralation between Abbott Laboratories and Penumbra
Considering the 90-day investment horizon Abbott Laboratories is expected to under-perform the Penumbra. But the stock apears to be less risky and, when comparing its historical volatility, Abbott Laboratories is 1.41 times less risky than Penumbra. The stock trades about -0.05 of its potential returns per unit of risk. The Penumbra is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 26,063 in Penumbra on January 12, 2025 and sell it today you would earn a total of 1,169 from holding Penumbra or generate 4.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Abbott Laboratories vs. Penumbra
Performance |
| Timeline |
| Abbott Laboratories |
| Penumbra |
Abbott Laboratories and Penumbra Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Abbott Laboratories and Penumbra
The main advantage of trading using opposite Abbott Laboratories and Penumbra positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Abbott Laboratories position performs unexpectedly, Penumbra 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 Penumbra will offset losses from the drop in Penumbra's long position.| Abbott Laboratories vs. AbbVie Inc | Abbott Laboratories vs. Eli Lilly and | Abbott Laboratories vs. Bristol Myers Squibb | Abbott Laboratories vs. Johnson Johnson |
| Penumbra vs. Insulet | Penumbra vs. TransMedics Group | Penumbra vs. Masimo | Penumbra vs. Inspire Medical Systems |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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