Correlation Between AbbVie and Alterity Therapeutics

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

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

Diversification Opportunities for AbbVie and Alterity Therapeutics

-0.18

Correlation Coefficient

AbbVie  Alterity Therapeutics

Good diversification

The 3 months correlation between AbbVie and Alterity is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding AbbVie Inc and Alterity Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alterity Therapeutics 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 Alterity Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alterity Therapeutics has no effect on the direction of AbbVie i.e., AbbVie and Alterity Therapeutics go up and down completely randomly.

Pair Corralation between AbbVie and Alterity Therapeutics

Given the investment horizon of 90 days AbbVie is expected to generate 28.46 times less return on investment than Alterity Therapeutics. But when comparing it to its historical volatility, AbbVie Inc is 8.47 times less risky than Alterity Therapeutics. It trades about 0.08 of its potential returns per unit of risk. Alterity Therapeutics is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  248.00  in Alterity Therapeutics on October 10, 2024 and sell it today you would earn a total of  124.00  from holding Alterity Therapeutics or generate 50.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

AbbVie Inc  vs.  Alterity Therapeutics

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 fairly stable fundamental drivers, AbbVie is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Alterity Therapeutics

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Alterity Therapeutics are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical indicators, Alterity Therapeutics exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AbbVie and Alterity Therapeutics

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

The idea behind AbbVie Inc and Alterity Therapeutics 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.

Check out your portfolio center.

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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.