Correlation Between ABB and Addtech AB

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

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

Diversification Opportunities for ABB and Addtech AB

0.37

Correlation Coefficient

ABB  Addtech AB

Weak diversification

The 3 months correlation between ABB and Addtech is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding ABB and Addtech AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Addtech AB and ABB 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 ABB are associated (or correlated) with Addtech AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Addtech AB has no effect on the direction of ABB i.e., ABB and Addtech AB go up and down completely randomly.

Pair Corralation between ABB and Addtech AB

Assuming the 90 days trading horizon ABB is expected to under-perform the Addtech AB. But the stock apears to be less risky and, when comparing its historical volatility, ABB is 1.08 times less risky than Addtech AB. The stock trades about -0.1 of its potential returns per unit of risk. The Addtech AB is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  30,120  in Addtech AB on December 30, 2024 and sell it today you would lose (660.00) from holding Addtech AB or give up 2.19% of portfolio value over 90 days.

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

ABB  vs.  Addtech AB

ABB

Risk-Adjusted Performance

Very Weak

Over the last 90 days ABB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain 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.

Addtech AB

Risk-Adjusted Performance

Very Weak

Over the last 90 days Addtech AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, Addtech AB is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with ABB and Addtech AB

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

The idea behind ABB and Addtech AB 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.