Correlation Between Medtronic PLC and AbbVie
Can any of the company-specific risk be diversified away by investing in both Medtronic PLC and AbbVie 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 Medtronic PLC and AbbVie into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Medtronic PLC and AbbVie Inc, you can compare the effects of market volatilities on Medtronic PLC and AbbVie 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 Medtronic PLC with a short position of AbbVie. Check out your portfolio center. Please also check ongoing floating volatility patterns of Medtronic PLC and AbbVie.
Diversification Opportunities for Medtronic PLC and AbbVie
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Medtronic and AbbVie is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Medtronic PLC and AbbVie Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AbbVie Inc and Medtronic PLC 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 Medtronic PLC are associated (or correlated) with AbbVie. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AbbVie Inc has no effect on the direction of Medtronic PLC i.e., Medtronic PLC and AbbVie go up and down completely randomly.
Pair Corralation between Medtronic PLC and AbbVie
Considering the 90-day investment horizon Medtronic PLC is expected to generate 0.58 times more return on investment than AbbVie. However, Medtronic PLC is 1.73 times less risky than AbbVie. It trades about -0.03 of its potential returns per unit of risk. AbbVie Inc is currently generating about -0.04 per unit of risk. If you would invest 9,025 in Medtronic PLC on October 20, 2024 and sell it today you would lose (217.00) from holding Medtronic PLC or give up 2.4% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Medtronic PLC vs. AbbVie Inc
Performance |
| Timeline |
| Medtronic PLC |
| AbbVie Inc |
Medtronic PLC and AbbVie Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Medtronic PLC and AbbVie
The main advantage of trading using opposite Medtronic PLC and AbbVie positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Medtronic PLC position performs unexpectedly, AbbVie 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 AbbVie will offset losses from the drop in AbbVie's long position.| Medtronic PLC vs. Edwards Lifesciences Corp | Medtronic PLC vs. Abbott Laboratories | Medtronic PLC vs. Boston Scientific Corp | Medtronic PLC vs. Zimmer Biomet Holdings |
| AbbVie vs. Merck Company | AbbVie vs. Pfizer Inc | AbbVie vs. Eli Lilly and | AbbVie vs. Bristol Myers Squibb |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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