Correlation Between Becton Dickinson and Abbott Laboratories

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

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

Diversification Opportunities for Becton Dickinson and Abbott Laboratories

-0.25

Correlation Coefficient

Becton Dickinson  Abbott Laboratories

Very good diversification

The 3 months correlation between Becton and Abbott is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Becton Dickinson and and Abbott Laboratories in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Abbott Laboratories and Becton Dickinson 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 Becton Dickinson and are associated (or correlated) with Abbott Laboratories. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Abbott Laboratories has no effect on the direction of Becton Dickinson i.e., Becton Dickinson and Abbott Laboratories go up and down completely randomly.

Pair Corralation between Becton Dickinson and Abbott Laboratories

Assuming the 90 days horizon Becton Dickinson and is expected to under-perform the Abbott Laboratories. In addition to that, Becton Dickinson is 1.02 times more volatile than Abbott Laboratories. It trades about 0.0 of its total potential returns per unit of risk. Abbott Laboratories is currently generating about 0.07 per unit of volatility. If you would invest  10,903  in Abbott Laboratories on December 21, 2024 and sell it today you would earn a total of  617.00  from holding Abbott Laboratories or generate 5.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Becton Dickinson and  vs.  Abbott Laboratories

Becton Dickinson

Risk-Adjusted Performance

Very Weak

Over the last 90 days Becton Dickinson and has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Becton Dickinson is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Abbott Laboratories

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Abbott Laboratories are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Abbott Laboratories may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Becton Dickinson and Abbott Laboratories

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

The idea behind Becton Dickinson and and Abbott Laboratories 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.