Correlation Between Abbott Laboratories and Adapthealth Corp

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

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

Diversification Opportunities for Abbott Laboratories and Adapthealth Corp

-0.04

Correlation Coefficient

Abbott Laboratories  Adapthealth Corp

Good diversification

The 3 months correlation between Abbott and Adapthealth is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Abbott Laboratories and Adapthealth Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adapthealth Corp 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 Adapthealth Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adapthealth Corp has no effect on the direction of Abbott Laboratories i.e., Abbott Laboratories and Adapthealth Corp go up and down completely randomly.

Pair Corralation between Abbott Laboratories and Adapthealth Corp

Considering the 90-day investment horizon Abbott Laboratories is expected to generate 0.52 times more return on investment than Adapthealth Corp. However, Abbott Laboratories is 1.94 times less risky than Adapthealth Corp. It trades about 0.15 of its potential returns per unit of risk. Adapthealth Corp is currently generating about -0.06 per unit of risk. If you would invest  11,652  in Abbott Laboratories on November 19, 2024 and sell it today you would earn a total of  1,409  from holding Abbott Laboratories or generate 12.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Abbott Laboratories  vs.  Adapthealth Corp

Abbott Laboratories

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Abbott Laboratories are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal fundamental drivers, Abbott Laboratories may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Adapthealth Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Adapthealth Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Abbott Laboratories and Adapthealth Corp

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

The idea behind Abbott Laboratories and Adapthealth Corp 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.