Correlation Between Abbott Laboratories and Demant AS
Can any of the company-specific risk be diversified away by investing in both Abbott Laboratories and Demant AS 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 Demant AS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Abbott Laboratories and Demant AS ADR, you can compare the effects of market volatilities on Abbott Laboratories and Demant AS 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 Demant AS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Abbott Laboratories and Demant AS.
Diversification Opportunities for Abbott Laboratories and Demant AS
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Abbott and Demant is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Abbott Laboratories and Demant AS ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Demant AS ADR 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 Demant AS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Demant AS ADR has no effect on the direction of Abbott Laboratories i.e., Abbott Laboratories and Demant AS go up and down completely randomly.
Pair Corralation between Abbott Laboratories and Demant AS
Considering the 90-day investment horizon Abbott Laboratories is expected to generate 2.36 times less return on investment than Demant AS. But when comparing it to its historical volatility, Abbott Laboratories is 1.61 times less risky than Demant AS. It trades about 0.03 of its potential returns per unit of risk. Demant AS ADR is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 1,363 in Demant AS ADR on August 30, 2024 and sell it today you would earn a total of 523.00 from holding Demant AS ADR or generate 38.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Abbott Laboratories vs. Demant AS ADR
Performance |
| Timeline |
| Abbott Laboratories |
| Demant AS ADR |
Abbott Laboratories and Demant AS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Abbott Laboratories and Demant AS
The main advantage of trading using opposite Abbott Laboratories and Demant AS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Abbott Laboratories position performs unexpectedly, Demant AS 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 Demant AS will offset losses from the drop in Demant AS'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 |
| Demant AS vs. CochLear Ltd ADR | Demant AS vs. GN Store Nord | Demant AS vs. GN Store Nord | Demant AS vs. Siemens Healthineers AG |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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