Correlation Between Charles River and AbbVie

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

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

Diversification Opportunities for Charles River and AbbVie

0.9

Correlation Coefficient

Charles River  AbbVie

Almost no diversification

The 3 months correlation between Charles and AbbVie is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Charles River Laboratories and AbbVie Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AbbVie Inc and Charles River 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 Charles River Laboratories are associated (or correlated) with AbbVie. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AbbVie Inc has no effect on the direction of Charles River i.e., Charles River and AbbVie go up and down completely randomly.

Pair Corralation between Charles River and AbbVie

Considering the 90-day investment horizon Charles River is expected to generate 1.03 times less return on investment than AbbVie. In addition to that, Charles River is 1.81 times more volatile than AbbVie Inc. It trades about 0.05 of its total potential returns per unit of risk. AbbVie Inc is currently generating about 0.09 per unit of volatility. If you would invest  13,974  in AbbVie Inc on February 28, 2024 and sell it today you would earn a total of  1,732  from holding AbbVie Inc or generate 12.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	99.19%
Values	Daily Returns

Charles River Laboratories  vs.  AbbVie Inc

Charles River Labora

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Charles River Laboratories has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in June 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

AbbVie Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AbbVie Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental drivers remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Charles River and AbbVie

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

The idea behind Charles River Laboratories and AbbVie Inc 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.