Correlation Between MAHLE Metal and AbbVie

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

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

Diversification Opportunities for MAHLE Metal and AbbVie

0.25

Correlation Coefficient

MAHLE Metal  AbbVie

Modest diversification

The 3 months correlation between MAHLE and AbbVie is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding MAHLE Metal Leve and AbbVie Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AbbVie Inc and MAHLE Metal 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 MAHLE Metal Leve 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 MAHLE Metal i.e., MAHLE Metal and AbbVie go up and down completely randomly.

Pair Corralation between MAHLE Metal and AbbVie

Assuming the 90 days trading horizon MAHLE Metal is expected to generate 1.64 times less return on investment than AbbVie. But when comparing it to its historical volatility, MAHLE Metal Leve is 1.0 times less risky than AbbVie. It trades about 0.04 of its potential returns per unit of risk. AbbVie Inc is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  6,760  in AbbVie Inc on September 28, 2024 and sell it today you would earn a total of  156.00  from holding AbbVie Inc or generate 2.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

MAHLE Metal Leve  vs.  AbbVie Inc

MAHLE Metal Leve

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MAHLE Metal Leve has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

AbbVie Inc

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in AbbVie Inc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental drivers, AbbVie is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with MAHLE Metal and AbbVie

The main advantage of trading using opposite MAHLE Metal and AbbVie positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MAHLE Metal 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 MAHLE Metal Leve 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.