Correlation Between Abbott Laboratories and CryoLife

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

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

Diversification Opportunities for Abbott Laboratories and CryoLife

0.73

Correlation Coefficient

Abbott Laboratories  CryoLife

Poor diversification

The 3 months correlation between Abbott and CryoLife is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Abbott Laboratories and CryoLife in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CryoLife 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 CryoLife. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CryoLife has no effect on the direction of Abbott Laboratories i.e., Abbott Laboratories and CryoLife go up and down completely randomly.

Pair Corralation between Abbott Laboratories and CryoLife

Assuming the 90 days horizon Abbott Laboratories is expected to generate 8.12 times less return on investment than CryoLife. But when comparing it to its historical volatility, Abbott Laboratories is 1.95 times less risky than CryoLife. It trades about 0.02 of its potential returns per unit of risk. CryoLife is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,130  in CryoLife on September 22, 2024 and sell it today you would earn a total of  1,535  from holding CryoLife or generate 135.84% return on investment over 90 days.

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

Abbott Laboratories  vs.  CryoLife

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 uncertain basic indicators, Abbott Laboratories may actually be approaching a critical reversion point that can send shares even higher in January 2025.

CryoLife

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CryoLife are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, CryoLife reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Abbott Laboratories and CryoLife

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

The idea behind Abbott Laboratories and CryoLife 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.