Correlation Between CEOTRONICS and ABB
Can any of the company-specific risk be diversified away by investing in both CEOTRONICS and ABB 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 CEOTRONICS and ABB into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CEOTRONICS and ABB, you can compare the effects of market volatilities on CEOTRONICS and ABB 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 CEOTRONICS with a short position of ABB. Check out your portfolio center. Please also check ongoing floating volatility patterns of CEOTRONICS and ABB.
Diversification Opportunities for CEOTRONICS and ABB
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between CEOTRONICS and ABB is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding CEOTRONICS and ABB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ABB and CEOTRONICS 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 CEOTRONICS are associated (or correlated) with ABB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ABB has no effect on the direction of CEOTRONICS i.e., CEOTRONICS and ABB go up and down completely randomly.
Pair Corralation between CEOTRONICS and ABB
Assuming the 90 days trading horizon CEOTRONICS is expected to generate 1.42 times less return on investment than ABB. In addition to that, CEOTRONICS is 1.46 times more volatile than ABB. It trades about 0.04 of its total potential returns per unit of risk. ABB is currently generating about 0.08 per unit of volatility. If you would invest 2,785 in ABB on September 3, 2024 and sell it today you would earn a total of 2,465 from holding ABB or generate 88.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CEOTRONICS vs. ABB
Performance |
| Timeline |
| CEOTRONICS |
| ABB |
CEOTRONICS and ABB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CEOTRONICS and ABB
The main advantage of trading using opposite CEOTRONICS and ABB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CEOTRONICS position performs unexpectedly, ABB 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 ABB will offset losses from the drop in ABB's long position.| CEOTRONICS vs. Xenia Hotels Resorts | CEOTRONICS vs. Wyndham Hotels Resorts | CEOTRONICS vs. NH HOTEL GROUP | CEOTRONICS vs. Japan Asia 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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