Correlation Between Masimo and Abbott Laboratories

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

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

Diversification Opportunities for Masimo and Abbott Laboratories

0.06

Correlation Coefficient

Masimo  Abbott Laboratories

Significant diversification

The 3 months correlation between Masimo and Abbott is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Masimo and Abbott Laboratories in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Abbott Laboratories and Masimo 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 Masimo are associated (or correlated) with Abbott Laboratories. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Abbott Laboratories has no effect on the direction of Masimo i.e., Masimo and Abbott Laboratories go up and down completely randomly.

Pair Corralation between Masimo and Abbott Laboratories

Given the investment horizon of 90 days Masimo is expected to generate 2.25 times more return on investment than Abbott Laboratories. However, Masimo is 2.25 times more volatile than Abbott Laboratories. It trades about -0.03 of its potential returns per unit of risk. Abbott Laboratories is currently generating about -0.16 per unit of risk. If you would invest  13,149  in Masimo on February 20, 2024 and sell it today you would lose (739.00) from holding Masimo or give up 5.62% of portfolio value over 90 days.

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

Masimo  vs.  Abbott Laboratories

Masimo

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Masimo has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Masimo is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Abbott Laboratories

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Abbott Laboratories has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's fundamental drivers remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Masimo and Abbott Laboratories

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

The idea behind Masimo and Abbott 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.