Correlation Between Abbott Laboratories and Shockwave Medical
Can any of the company-specific risk be diversified away by investing in both Abbott Laboratories and Shockwave Medical 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 Shockwave Medical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Abbott Laboratories and Shockwave Medical, you can compare the effects of market volatilities on Abbott Laboratories and Shockwave Medical 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 Shockwave Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Abbott Laboratories and Shockwave Medical.
Diversification Opportunities for Abbott Laboratories and Shockwave Medical
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Abbott and Shockwave is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Abbott Laboratories and Shockwave Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shockwave Medical 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 Shockwave Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shockwave Medical has no effect on the direction of Abbott Laboratories i.e., Abbott Laboratories and Shockwave Medical go up and down completely randomly.
Pair Corralation between Abbott Laboratories and Shockwave Medical
Considering the 90-day investment horizon Abbott Laboratories is expected to generate 12.89 times less return on investment than Shockwave Medical. But when comparing it to its historical volatility, Abbott Laboratories is 2.2 times less risky than Shockwave Medical. It trades about 0.02 of its potential returns per unit of risk. Shockwave Medical is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 18,204 in Shockwave Medical on August 27, 2024 and sell it today you would earn a total of 8,641 from holding Shockwave Medical or generate 47.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 25.71% |
| Values | Daily Returns |
Abbott Laboratories vs. Shockwave Medical
Performance |
| Timeline |
| Abbott Laboratories |
| Shockwave Medical |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Abbott Laboratories and Shockwave Medical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Abbott Laboratories and Shockwave Medical
The main advantage of trading using opposite Abbott Laboratories and Shockwave Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Abbott Laboratories position performs unexpectedly, Shockwave Medical 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 Shockwave Medical will offset losses from the drop in Shockwave Medical'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 |
| Shockwave Medical vs. Inari Medical | Shockwave Medical vs. Outset Medical | Shockwave Medical vs. Clearpoint Neuro | Shockwave Medical 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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