Correlation Between Abbott Laboratories and Becton Dickinson

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

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

Diversification Opportunities for Abbott Laboratories and Becton Dickinson

-0.2

Correlation Coefficient

Abbott Laboratories  Becton Dickinson

Good diversification

The 3 months correlation between Abbott and Becton is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Abbott Laboratories and Becton Dickinson and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Becton Dickinson and Abbott Laboratories 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 Abbott Laboratories are associated (or correlated) with Becton Dickinson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Becton Dickinson has no effect on the direction of Abbott Laboratories i.e., Abbott Laboratories and Becton Dickinson go up and down completely randomly.

Pair Corralation between Abbott Laboratories and Becton Dickinson

Assuming the 90 days horizon Abbott Laboratories is expected to generate 7.51 times less return on investment than Becton Dickinson. But when comparing it to its historical volatility, Abbott Laboratories is 1.32 times less risky than Becton Dickinson. It trades about 0.05 of its potential returns per unit of risk. Becton Dickinson and is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  21,100  in Becton Dickinson and on October 8, 2024 and sell it today you would earn a total of  940.00  from holding Becton Dickinson and or generate 4.45% return on investment over 90 days.

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

Abbott Laboratories  vs.  Becton Dickinson and

Abbott Laboratories

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Abbott Laboratories are ranked lower than 6 (%) 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.

Becton Dickinson

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Becton Dickinson and are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Becton Dickinson is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Abbott Laboratories and Becton Dickinson

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

The idea behind Abbott Laboratories and Becton Dickinson and 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.