Correlation Between Abbott Laboratories and UFP Technologies
Can any of the company-specific risk be diversified away by investing in both Abbott Laboratories and UFP Technologies 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 UFP Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Abbott Laboratories and UFP Technologies, you can compare the effects of market volatilities on Abbott Laboratories and UFP Technologies 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 UFP Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Abbott Laboratories and UFP Technologies.
Diversification Opportunities for Abbott Laboratories and UFP Technologies
-0.69 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Abbott and UFP is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Abbott Laboratories and UFP Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UFP Technologies 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 UFP Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UFP Technologies has no effect on the direction of Abbott Laboratories i.e., Abbott Laboratories and UFP Technologies go up and down completely randomly.
Pair Corralation between Abbott Laboratories and UFP Technologies
Considering the 90-day investment horizon Abbott Laboratories is expected to under-perform the UFP Technologies. But the stock apears to be less risky and, when comparing its historical volatility, Abbott Laboratories is 3.61 times less risky than UFP Technologies. The stock trades about -0.11 of its potential returns per unit of risk. The UFP Technologies is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 23,609 in UFP Technologies on February 23, 2024 and sell it today you would earn a total of 1,630 from holding UFP Technologies or generate 6.9% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Abbott Laboratories vs. UFP Technologies
Performance |
Timeline |
Abbott Laboratories |
UFP Technologies |
Abbott Laboratories and UFP Technologies Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Abbott Laboratories and UFP Technologies
The main advantage of trading using opposite Abbott Laboratories and UFP Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Abbott Laboratories position performs unexpectedly, UFP Technologies 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 UFP Technologies will offset losses from the drop in UFP Technologies' long position.Abbott Laboratories vs. Neuropace | Abbott Laboratories vs. Electromed | Abbott Laboratories vs. Orthopediatrics Corp | Abbott Laboratories vs. SurModics |
UFP Technologies vs. Ainos Inc | UFP Technologies vs. Rxsight | UFP Technologies vs. PulmonxCorp | UFP Technologies vs. Orthofix Medical |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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