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
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Abbott and Stryker is 0.66. 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
Considering the 90-day investment horizon Abbott Laboratories is expected to under-perform the Stryker. In addition to that, Abbott Laboratories is 1.02 times more volatile than Stryker. It trades about -0.22 of its total potential returns per unit of risk. Stryker is currently generating about -0.15 per unit of volatility. If you would invest 38,792 in Stryker on December 24, 2024 and sell it today you would lose (1,681) from holding Stryker or give up 4.33% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| 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. AbbVie Inc | Abbott Laboratories vs. Eli Lilly and | Abbott Laboratories vs. Bristol Myers Squibb | Abbott Laboratories vs. Johnson Johnson |
| Stryker vs. Boston Scientific Corp | Stryker vs. Abbott Laboratories | Stryker vs. Medtronic PLC | Stryker vs. DexCom Inc |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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