Correlation Between Abbott Laboratories and Star Equity

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

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

Diversification Opportunities for Abbott Laboratories and Star Equity

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Correlation Coefficient

Abbott Laboratories  Star Equity

Pay attention - limited upside

The 3 months correlation between Abbott and Star is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Abbott Laboratories and Star Equity Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Star Equity Holdings 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 Star Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Star Equity Holdings has no effect on the direction of Abbott Laboratories i.e., Abbott Laboratories and Star Equity go up and down completely randomly.

Pair Corralation between Abbott Laboratories and Star Equity

Considering the 90-day investment horizon Abbott Laboratories is expected to generate 1.63 times less return on investment than Star Equity. But when comparing it to its historical volatility, Abbott Laboratories is 2.47 times less risky than Star Equity. It trades about 0.16 of its potential returns per unit of risk. Star Equity Holdings is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  217.00  in Star Equity Holdings on December 27, 2024 and sell it today you would earn a total of  46.25  from holding Star Equity Holdings or generate 21.31% return on investment over 90 days.

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

Abbott Laboratories  vs.  Star Equity Holdings

Abbott Laboratories

Risk-Adjusted Performance

OK

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 unveiled solid returns over the last few months and may actually be approaching a breakup point.

Star Equity Holdings

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Star Equity Holdings are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Star Equity reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Abbott Laboratories and Star Equity

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

The idea behind Abbott Laboratories and Star Equity Holdings 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.