Correlation Between Shockwave Medical and Abbott Laboratories
Can any of the company-specific risk be diversified away by investing in both Shockwave Medical 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 Shockwave Medical and Abbott Laboratories into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Shockwave Medical and Abbott Laboratories, you can compare the effects of market volatilities on Shockwave Medical 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 Shockwave Medical with a short position of Abbott Laboratories. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shockwave Medical and Abbott Laboratories.
Diversification Opportunities for Shockwave Medical and Abbott Laboratories
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Shockwave and Abbott is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Shockwave Medical and Abbott Laboratories in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Abbott Laboratories and Shockwave Medical 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 Shockwave Medical 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 Shockwave Medical i.e., Shockwave Medical and Abbott Laboratories go up and down completely randomly.
Pair Corralation between Shockwave Medical and Abbott Laboratories
Given the investment horizon of 90 days Shockwave Medical is expected to generate 2.2 times more return on investment than Abbott Laboratories. However, Shockwave Medical is 2.2 times more volatile than Abbott Laboratories. It trades about 0.14 of its potential returns per unit of risk. Abbott Laboratories is currently generating about 0.02 per unit of risk. If you would invest 18,204 in Shockwave Medical on August 27, 2024 and sell it today you would earn a total of 8,641 from holding Shockwave Medical or generate 47.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 25.71% |
| Values | Daily Returns |
Shockwave Medical vs. Abbott Laboratories
Performance |
| Timeline |
| Shockwave Medical |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Abbott Laboratories |
Shockwave Medical and Abbott Laboratories Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Shockwave Medical and Abbott Laboratories
The main advantage of trading using opposite Shockwave Medical and Abbott Laboratories positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shockwave Medical 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.| Shockwave Medical vs. Inari Medical | Shockwave Medical vs. Outset Medical | Shockwave Medical vs. Clearpoint Neuro | Shockwave Medical vs. Inspire Medical Systems |
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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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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