Correlation Between Haverty Furniture and Abbott Laboratories

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

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

Diversification Opportunities for Haverty Furniture and Abbott Laboratories

0.21

Correlation Coefficient

Haverty Furniture  Abbott Laboratories

Modest diversification

The 3 months correlation between Haverty and Abbott is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Haverty Furniture Companies and Abbott Laboratories in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Abbott Laboratories and Haverty Furniture 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 Haverty Furniture Companies 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 Haverty Furniture i.e., Haverty Furniture and Abbott Laboratories go up and down completely randomly.

Pair Corralation between Haverty Furniture and Abbott Laboratories

Assuming the 90 days horizon Haverty Furniture is expected to generate 8.13 times less return on investment than Abbott Laboratories. In addition to that, Haverty Furniture is 1.97 times more volatile than Abbott Laboratories. It trades about 0.01 of its total potential returns per unit of risk. Abbott Laboratories is currently generating about 0.15 per unit of volatility. If you would invest  10,531  in Abbott Laboratories on October 27, 2024 and sell it today you would earn a total of  1,247  from holding Abbott Laboratories or generate 11.84% return on investment over 90 days.

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

Haverty Furniture Companies  vs.  Abbott Laboratories

Haverty Furniture

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Haverty Furniture Companies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Haverty Furniture is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Abbott Laboratories

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Abbott Laboratories are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Abbott Laboratories may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Haverty Furniture and Abbott Laboratories

The main advantage of trading using opposite Haverty Furniture and Abbott Laboratories positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Haverty Furniture 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 Haverty Furniture Companies 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.