Correlation Between Avanos Medical and AbbVie

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

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

Diversification Opportunities for Avanos Medical and AbbVie

0.53

Correlation Coefficient

Avanos Medical  AbbVie

Very weak diversification

The 3 months correlation between Avanos and AbbVie is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Avanos Medical and AbbVie Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AbbVie Inc and Avanos Medical 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 Avanos Medical are associated (or correlated) with AbbVie. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AbbVie Inc has no effect on the direction of Avanos Medical i.e., Avanos Medical and AbbVie go up and down completely randomly.

Pair Corralation between Avanos Medical and AbbVie

Given the investment horizon of 90 days Avanos Medical is expected to under-perform the AbbVie. In addition to that, Avanos Medical is 1.73 times more volatile than AbbVie Inc. It trades about -0.04 of its total potential returns per unit of risk. AbbVie Inc is currently generating about 0.04 per unit of volatility. If you would invest  14,002  in AbbVie Inc on October 11, 2024 and sell it today you would earn a total of  3,848  from holding AbbVie Inc or generate 27.48% return on investment over 90 days.

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

Avanos Medical  vs.  AbbVie Inc

Avanos Medical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Avanos Medical has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

AbbVie Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AbbVie Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's fundamental drivers remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Avanos Medical and AbbVie

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

The idea behind Avanos Medical and AbbVie 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 Global Correlations module to find global opportunities by holding instruments from different markets.