Correlation Between Koninklijke Philips and Abbott Laboratories
Can any of the company-specific risk be diversified away by investing in both Koninklijke Philips 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 Koninklijke Philips and Abbott Laboratories into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Koninklijke Philips NV and Abbott Laboratories, you can compare the effects of market volatilities on Koninklijke Philips 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 Koninklijke Philips with a short position of Abbott Laboratories. Check out your portfolio center. Please also check ongoing floating volatility patterns of Koninklijke Philips and Abbott Laboratories.
Diversification Opportunities for Koninklijke Philips and Abbott Laboratories
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Koninklijke and Abbott is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Koninklijke Philips NV and Abbott Laboratories in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Abbott Laboratories and Koninklijke Philips 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 Koninklijke Philips NV 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 Koninklijke Philips i.e., Koninklijke Philips and Abbott Laboratories go up and down completely randomly.
Pair Corralation between Koninklijke Philips and Abbott Laboratories
Considering the 90-day investment horizon Koninklijke Philips NV is expected to generate 1.42 times more return on investment than Abbott Laboratories. However, Koninklijke Philips is 1.42 times more volatile than Abbott Laboratories. It trades about -0.06 of its potential returns per unit of risk. Abbott Laboratories is currently generating about -0.14 per unit of risk. If you would invest 2,646 in Koninklijke Philips NV on September 12, 2024 and sell it today you would lose (42.00) from holding Koninklijke Philips NV or give up 1.59% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Koninklijke Philips NV vs. Abbott Laboratories
Performance |
| Timeline |
| Koninklijke Philips |
| Abbott Laboratories |
Koninklijke Philips and Abbott Laboratories Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Koninklijke Philips and Abbott Laboratories
The main advantage of trading using opposite Koninklijke Philips and Abbott Laboratories positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Koninklijke Philips 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.| Koninklijke Philips vs. ZimVie Inc | Koninklijke Philips vs. Stryker | Koninklijke Philips vs. Boston Scientific Corp | Koninklijke Philips vs. STERIS plc |
| Abbott Laboratories vs. Neuropace | Abbott Laboratories vs. Electromed | Abbott Laboratories vs. Orthopediatrics Corp | Abbott Laboratories vs. SurModics |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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