Correlation Between Abbott Laboratories and Myomo

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

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

Diversification Opportunities for Abbott Laboratories and Myomo

-0.49

Correlation Coefficient

Abbott Laboratories  Myomo

Very good diversification

The 3 months correlation between Abbott and Myomo is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Abbott Laboratories and Myomo Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Myomo Inc 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 Myomo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Myomo Inc has no effect on the direction of Abbott Laboratories i.e., Abbott Laboratories and Myomo go up and down completely randomly.

Pair Corralation between Abbott Laboratories and Myomo

Considering the 90-day investment horizon Abbott Laboratories is expected to generate 43.74 times less return on investment than Myomo. But when comparing it to its historical volatility, Abbott Laboratories is 5.28 times less risky than Myomo. It trades about 0.01 of its potential returns per unit of risk. Myomo Inc is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  48.00  in Myomo Inc on October 11, 2024 and sell it today you would earn a total of  644.00  from holding Myomo Inc or generate 1341.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Abbott Laboratories  vs.  Myomo Inc

Abbott Laboratories

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Abbott Laboratories has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental drivers, Abbott Laboratories is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Myomo Inc

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Myomo Inc are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Myomo displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Abbott Laboratories and Myomo

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

The idea behind Abbott Laboratories and Myomo Inc 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.