Correlation Between ABM Industries and Dolby Laboratories

Can any of the company-specific risk be diversified away by investing in both ABM Industries and Dolby 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 ABM Industries and Dolby Laboratories into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ABM Industries Incorporated and Dolby Laboratories, you can compare the effects of market volatilities on ABM Industries and Dolby 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 ABM Industries with a short position of Dolby Laboratories. Check out your portfolio center. Please also check ongoing floating volatility patterns of ABM Industries and Dolby Laboratories.

Diversification Opportunities for ABM Industries and Dolby Laboratories

-0.12

Correlation Coefficient

ABM Industries  Dolby Laboratories

Good diversification

The @@bw1eo months correlation between ABM and Dolby is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding ABM Industries Incorporated and Dolby Laboratories in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dolby Laboratories and ABM Industries 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 ABM Industries Incorporated are associated (or correlated) with Dolby Laboratories. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dolby Laboratories has no effect on the direction of ABM Industries i.e., ABM Industries and Dolby Laboratories go up and down completely randomly.

Pair Corralation between ABM Industries and Dolby Laboratories

Considering the 90-day investment horizon ABM Industries Incorporated is expected to generate 1.44 times more return on investment than Dolby Laboratories. However, ABM Industries is 1.44 times more volatile than Dolby Laboratories. It trades about 0.02 of its potential returns per unit of risk. Dolby Laboratories is currently generating about 0.0 per unit of risk. If you would invest  4,171  in ABM Industries Incorporated on February 3, 2024 and sell it today you would earn a total of  306.00  from holding ABM Industries Incorporated or generate 7.34% return on investment over 90 days.

Time Period	@@bw1EO Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

ABM Industries Incorporated  vs.  Dolby Laboratories

ABM Industries

Risk-Adjusted Performance

1 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ABM Industries Incorporated are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental drivers, ABM Industries is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Dolby Laboratories

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Dolby Laboratories has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong essential indicators, Dolby Laboratories is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with ABM Industries and Dolby Laboratories

The main advantage of trading using opposite ABM Industries and Dolby Laboratories positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ABM Industries position performs unexpectedly, Dolby 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 Dolby Laboratories will offset losses from the drop in Dolby Laboratories' long position.

The idea behind ABM Industries Incorporated and Dolby Laboratories pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .