Correlation Between Medtronic PLC and Abbott Laboratories
Can any of the company-specific risk be diversified away by investing in both Medtronic PLC 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 Medtronic PLC and Abbott Laboratories into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Medtronic PLC and Abbott Laboratories, you can compare the effects of market volatilities on Medtronic PLC 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 Medtronic PLC with a short position of Abbott Laboratories. Check out your portfolio center. Please also check ongoing floating volatility patterns of Medtronic PLC and Abbott Laboratories.
Diversification Opportunities for Medtronic PLC and Abbott Laboratories
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Medtronic and Abbott is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Medtronic PLC and Abbott Laboratories in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Abbott Laboratories 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 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 Medtronic PLC i.e., Medtronic PLC and Abbott Laboratories go up and down completely randomly.
Pair Corralation between Medtronic PLC and Abbott Laboratories
Considering the 90-day investment horizon Medtronic PLC is expected to generate 2.82 times less return on investment than Abbott Laboratories. In addition to that, Medtronic PLC is 1.0 times more volatile than Abbott Laboratories. It trades about 0.01 of its total potential returns per unit of risk. Abbott Laboratories is currently generating about 0.04 per unit of volatility. If you would invest 10,419 in Abbott Laboratories on August 28, 2024 and sell it today you would earn a total of 1,394 from holding Abbott Laboratories or generate 13.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Medtronic PLC vs. Abbott Laboratories
Performance |
| Timeline |
| Medtronic PLC |
| Abbott Laboratories |
Medtronic PLC and Abbott Laboratories Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Medtronic PLC and Abbott Laboratories
The main advantage of trading using opposite Medtronic PLC and Abbott Laboratories positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Medtronic PLC 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.| Medtronic PLC vs. Edwards Lifesciences Corp | Medtronic PLC vs. Abbott Laboratories | Medtronic PLC vs. Boston Scientific Corp | Medtronic PLC vs. Zimmer Biomet Holdings |
| Abbott Laboratories vs. AbbVie Inc | Abbott Laboratories vs. Eli Lilly and | Abbott Laboratories vs. Bristol Myers Squibb | Abbott Laboratories vs. Johnson Johnson |
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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