Correlation Between Abbott Laboratories and Electromed
Can any of the company-specific risk be diversified away by investing in both Abbott Laboratories and Electromed 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 Abbott Laboratories and Electromed into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Abbott Laboratories and Electromed, you can compare the effects of market volatilities on Abbott Laboratories and Electromed 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 Abbott Laboratories with a short position of Electromed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Abbott Laboratories and Electromed.
Diversification Opportunities for Abbott Laboratories and Electromed
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Abbott and Electromed is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Abbott Laboratories and Electromed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electromed and Abbott Laboratories 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 Abbott Laboratories are associated (or correlated) with Electromed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Electromed has no effect on the direction of Abbott Laboratories i.e., Abbott Laboratories and Electromed go up and down completely randomly.
Pair Corralation between Abbott Laboratories and Electromed
Considering the 90-day investment horizon Abbott Laboratories is expected to generate 0.66 times more return on investment than Electromed. However, Abbott Laboratories is 1.51 times less risky than Electromed. It trades about -0.24 of its potential returns per unit of risk. Electromed is currently generating about -0.52 per unit of risk. If you would invest 11,260 in Abbott Laboratories on January 19, 2024 and sell it today you would lose (670.00) from holding Abbott Laboratories or give up 5.95% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Abbott Laboratories vs. Electromed
Performance |
| Timeline |
| Abbott Laboratories |
| Electromed |
Abbott Laboratories and Electromed Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Abbott Laboratories and Electromed
The main advantage of trading using opposite Abbott Laboratories and Electromed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Abbott Laboratories position performs unexpectedly, Electromed 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 Electromed will offset losses from the drop in Electromed's long position.| Abbott Laboratories vs. Establishment Labs Holdings | Abbott Laboratories vs. Beyond Air | Abbott Laboratories vs. Bio Rad Laboratories | Abbott Laboratories vs. Boston Scientific Corp |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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