Correlation Between Aurora Spine and Abbott Laboratories

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Can any of the company-specific risk be diversified away by investing in both Aurora Spine and Abbott Laboratories 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 Aurora Spine and Abbott Laboratories into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aurora Spine and Abbott Laboratories, you can compare the effects of market volatilities on Aurora Spine and Abbott Laboratories 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 Aurora Spine with a short position of Abbott Laboratories. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aurora Spine and Abbott Laboratories.

Diversification Opportunities for Aurora Spine and Abbott Laboratories

0.4
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Aurora and Abbott is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Aurora Spine and Abbott Laboratories in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Abbott Laboratories and Aurora Spine 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 Aurora Spine are associated (or correlated) with Abbott Laboratories. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Abbott Laboratories has no effect on the direction of Aurora Spine i.e., Aurora Spine and Abbott Laboratories go up and down completely randomly.

Pair Corralation between Aurora Spine and Abbott Laboratories

Assuming the 90 days horizon Aurora Spine is expected to generate 4.29 times more return on investment than Abbott Laboratories. However, Aurora Spine is 4.29 times more volatile than Abbott Laboratories. It trades about 0.02 of its potential returns per unit of risk. Abbott Laboratories is currently generating about 0.02 per unit of risk. If you would invest  31.00  in Aurora Spine on September 13, 2024 and sell it today you would lose (2.00) from holding Aurora Spine or give up 6.45% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Aurora Spine  vs.  Abbott Laboratories

 Performance 
       Timeline  
Aurora Spine 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Aurora Spine are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Aurora Spine reported solid returns over the last few months and may actually be approaching a breakup point.
Abbott Laboratories 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Abbott Laboratories has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental drivers, Abbott Laboratories is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Aurora Spine and Abbott Laboratories Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Aurora Spine and Abbott Laboratories

The main advantage of trading using opposite Aurora Spine and Abbott Laboratories positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aurora Spine position performs unexpectedly, Abbott Laboratories 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 Abbott Laboratories will offset losses from the drop in Abbott Laboratories' long position.
The idea behind Aurora Spine and Abbott Laboratories pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.

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