Correlation Between Global X and AbbVie

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

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

Diversification Opportunities for Global X and AbbVie

0.04

Correlation Coefficient

Global X  AbbVie

Significant diversification

The 3 months correlation between Global and AbbVie is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Global X Funds and AbbVie Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AbbVie Inc and Global X 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 Global X Funds 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 Global X i.e., Global X and AbbVie go up and down completely randomly.

Pair Corralation between Global X and AbbVie

Assuming the 90 days trading horizon Global X Funds is expected to generate 0.72 times more return on investment than AbbVie. However, Global X Funds is 1.39 times less risky than AbbVie. It trades about 0.09 of its potential returns per unit of risk. AbbVie Inc is currently generating about 0.04 per unit of risk. If you would invest  2,851  in Global X Funds on September 25, 2024 and sell it today you would earn a total of  2,119  from holding Global X Funds or generate 74.32% return on investment over 90 days.

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

Global X Funds  vs.  AbbVie Inc

Global X Funds

Risk-Adjusted Performance

12 of 100

Good

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

AbbVie Inc

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AbbVie Inc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain fundamental drivers, AbbVie may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Global X and AbbVie

The main advantage of trading using opposite Global X and AbbVie positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global X 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 Global X Funds 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.