Correlation Between AbbVie and Amarin PLC

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

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

Diversification Opportunities for AbbVie and Amarin PLC

-0.05

Correlation Coefficient

AbbVie  Amarin PLC

Good diversification

The 3 months correlation between AbbVie and Amarin is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding AbbVie Inc and Amarin PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amarin PLC and AbbVie 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 AbbVie Inc are associated (or correlated) with Amarin PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amarin PLC has no effect on the direction of AbbVie i.e., AbbVie and Amarin PLC go up and down completely randomly.

Pair Corralation between AbbVie and Amarin PLC

Given the investment horizon of 90 days AbbVie Inc is expected to generate 0.27 times more return on investment than Amarin PLC. However, AbbVie Inc is 3.65 times less risky than Amarin PLC. It trades about 0.3 of its potential returns per unit of risk. Amarin PLC is currently generating about -0.01 per unit of risk. If you would invest  16,992  in AbbVie Inc on December 19, 2024 and sell it today you would earn a total of  4,393  from holding AbbVie Inc or generate 25.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

AbbVie Inc  vs.  Amarin PLC

AbbVie Inc

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in AbbVie Inc are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting fundamental drivers, AbbVie showed solid returns over the last few months and may actually be approaching a breakup point.

Amarin PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days Amarin PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Amarin PLC is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with AbbVie and Amarin PLC

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

The idea behind AbbVie Inc and Amarin PLC 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.