Correlation Between Absolent Group and ABB

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

By analyzing existing cross correlation between Absolent Group AB and ABB, you can compare the effects of market volatilities on Absolent Group and ABB 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 Absolent Group with a short position of ABB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Absolent Group and ABB.

Diversification Opportunities for Absolent Group and ABB

-0.71

Correlation Coefficient

Absolent Group  ABB

Pay attention - limited upside

The 3 months correlation between Absolent and ABB is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Absolent Group AB and ABB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ABB and Absolent Group 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 Absolent Group AB are associated (or correlated) with ABB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ABB has no effect on the direction of Absolent Group i.e., Absolent Group and ABB go up and down completely randomly.

Pair Corralation between Absolent Group and ABB

Assuming the 90 days trading horizon Absolent Group AB is expected to under-perform the ABB. In addition to that, Absolent Group is 1.32 times more volatile than ABB. It trades about -0.08 of its total potential returns per unit of risk. ABB is currently generating about 0.32 per unit of volatility. If you would invest  49,230  in ABB on January 29, 2024 and sell it today you would earn a total of  4,710  from holding ABB or generate 9.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Absolent Group AB  vs.  ABB

Absolent Group AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Absolent Group AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in May 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

ABB

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ABB are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental drivers, ABB unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Absolent Group and ABB

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

The idea behind Absolent Group AB and ABB 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.