Correlation Between NYSE Composite and Abbott Laboratories
Can any of the company-specific risk be diversified away by investing in both NYSE Composite 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 NYSE Composite and Abbott Laboratories into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and Abbott Laboratories, you can compare the effects of market volatilities on NYSE Composite 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 NYSE Composite with a short position of Abbott Laboratories. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Abbott Laboratories.
Diversification Opportunities for NYSE Composite and Abbott Laboratories
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between NYSE and Abbott is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Abbott Laboratories in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Abbott Laboratories and NYSE Composite 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 NYSE Composite 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 NYSE Composite i.e., NYSE Composite and Abbott Laboratories go up and down completely randomly.
Pair Corralation between NYSE Composite and Abbott Laboratories
Assuming the 90 days trading horizon NYSE Composite is expected to generate 1.29 times less return on investment than Abbott Laboratories. But when comparing it to its historical volatility, NYSE Composite is 1.93 times less risky than Abbott Laboratories. It trades about 0.26 of its potential returns per unit of risk. Abbott Laboratories is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 11,340 in Abbott Laboratories on August 30, 2024 and sell it today you would earn a total of 555.00 from holding Abbott Laboratories or generate 4.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
NYSE Composite vs. Abbott Laboratories
Performance |
| Timeline |
NYSE Composite and Abbott Laboratories Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
Abbott Laboratories
Pair trading matchups for Abbott Laboratories
Pair Trading with NYSE Composite and Abbott Laboratories
The main advantage of trading using opposite NYSE Composite and Abbott Laboratories positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite 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.| NYSE Composite vs. Delek Drilling | NYSE Composite vs. Helmerich and Payne | NYSE Composite vs. Waste Management | NYSE Composite vs. US Global Investors |
| 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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