Correlation Between Abbott Laboratories and Establishment Labs
Can any of the company-specific risk be diversified away by investing in both Abbott Laboratories and Establishment Labs 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 Establishment Labs into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Abbott Laboratories and Establishment Labs Holdings, you can compare the effects of market volatilities on Abbott Laboratories and Establishment Labs 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 Establishment Labs. Check out your portfolio center. Please also check ongoing floating volatility patterns of Abbott Laboratories and Establishment Labs.
Diversification Opportunities for Abbott Laboratories and Establishment Labs
-0.18 | Correlation Coefficient |
Good diversification
The 3 months correlation between Abbott and Establishment is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Abbott Laboratories and Establishment Labs Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Establishment Labs 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 Establishment Labs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Establishment Labs has no effect on the direction of Abbott Laboratories i.e., Abbott Laboratories and Establishment Labs go up and down completely randomly.
Pair Corralation between Abbott Laboratories and Establishment Labs
Considering the 90-day investment horizon Abbott Laboratories is expected to under-perform the Establishment Labs. But the stock apears to be less risky and, when comparing its historical volatility, Abbott Laboratories is 2.23 times less risky than Establishment Labs. The stock trades about -0.12 of its potential returns per unit of risk. The Establishment Labs Holdings is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 5,104 in Establishment Labs Holdings on January 20, 2024 and sell it today you would earn a total of 153.00 from holding Establishment Labs Holdings or generate 3.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Abbott Laboratories vs. Establishment Labs Holdings
Performance |
| Timeline |
| Abbott Laboratories |
| Establishment Labs |
Abbott Laboratories and Establishment Labs Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Abbott Laboratories and Establishment Labs
The main advantage of trading using opposite Abbott Laboratories and Establishment Labs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Abbott Laboratories position performs unexpectedly, Establishment Labs 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 Establishment Labs will offset losses from the drop in Establishment Labs' long position.| Abbott Laboratories vs. Agilent Technologies | Abbott Laboratories vs. Illumina | Abbott Laboratories vs. Waters | Abbott Laboratories vs. Thermo Fisher Scientific |
| Establishment Labs vs. Agilent Technologies | Establishment Labs vs. Illumina | Establishment Labs vs. Waters | Establishment Labs vs. Thermo Fisher Scientific |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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