Correlation Between Casio Computer and Abbott Laboratories

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

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

Diversification Opportunities for Casio Computer and Abbott Laboratories

0.38

Correlation Coefficient

Casio Computer  Abbott Laboratories

Weak diversification

The 3 months correlation between Casio and Abbott is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Casio Computer CoLtd and Abbott Laboratories in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Abbott Laboratories and Casio Computer 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 Casio Computer CoLtd 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 Casio Computer i.e., Casio Computer and Abbott Laboratories go up and down completely randomly.

Pair Corralation between Casio Computer and Abbott Laboratories

Assuming the 90 days trading horizon Casio Computer is expected to generate 4.37 times less return on investment than Abbott Laboratories. But when comparing it to its historical volatility, Casio Computer CoLtd is 1.35 times less risky than Abbott Laboratories. It trades about 0.08 of its potential returns per unit of risk. Abbott Laboratories is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  10,941  in Abbott Laboratories on December 11, 2024 and sell it today you would earn a total of  1,859  from holding Abbott Laboratories or generate 16.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Casio Computer CoLtd  vs.  Abbott Laboratories

Casio Computer CoLtd

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Casio Computer CoLtd are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, Casio Computer is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Abbott Laboratories

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Abbott Laboratories are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain essential indicators, Abbott Laboratories unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Casio Computer and Abbott Laboratories

The main advantage of trading using opposite Casio Computer and Abbott Laboratories positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Casio Computer 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 Casio Computer CoLtd 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.