Correlation Between Stryker and Abbott Laboratories
Can any of the company-specific risk be diversified away by investing in both Stryker 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 Stryker and Abbott Laboratories into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stryker and Abbott Laboratories, you can compare the effects of market volatilities on Stryker 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 Stryker with a short position of Abbott Laboratories. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stryker and Abbott Laboratories.
Diversification Opportunities for Stryker and Abbott Laboratories
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Stryker and Abbott is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Stryker and Abbott Laboratories in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Abbott Laboratories and Stryker 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 Stryker 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 Stryker i.e., Stryker and Abbott Laboratories go up and down completely randomly.
Pair Corralation between Stryker and Abbott Laboratories
Assuming the 90 days horizon Stryker is expected to generate 1.17 times more return on investment than Abbott Laboratories. However, Stryker is 1.17 times more volatile than Abbott Laboratories. It trades about 0.3 of its potential returns per unit of risk. Abbott Laboratories is currently generating about 0.18 per unit of risk. If you would invest 32,820 in Stryker on August 29, 2024 and sell it today you would earn a total of 4,300 from holding Stryker or generate 13.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Stryker vs. Abbott Laboratories
Performance |
| Timeline |
| Stryker |
| Abbott Laboratories |
Stryker and Abbott Laboratories Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Stryker and Abbott Laboratories
The main advantage of trading using opposite Stryker and Abbott Laboratories positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stryker 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.| Stryker vs. Superior Plus Corp | Stryker vs. NMI Holdings | Stryker vs. Origin Agritech | Stryker vs. SIVERS SEMICONDUCTORS AB |
| Abbott Laboratories vs. THAI BEVERAGE | Abbott Laboratories vs. Alfa Financial Software | Abbott Laboratories vs. ScanSource | Abbott Laboratories vs. Solstad Offshore ASA |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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