Correlation Between Loop Energy and ABB

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

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

Diversification Opportunities for Loop Energy and ABB

0.0

Correlation Coefficient

Loop Energy  ABB

Pay attention - limited upside

The 3 months correlation between Loop and ABB is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Loop Energy and ABB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ABB and Loop Energy 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 Loop Energy are associated (or correlated) with ABB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ABB has no effect on the direction of Loop Energy i.e., Loop Energy and ABB go up and down completely randomly.

Pair Corralation between Loop Energy and ABB

Assuming the 90 days horizon Loop Energy is expected to generate 22.35 times more return on investment than ABB. However, Loop Energy is 22.35 times more volatile than ABB. It trades about 0.06 of its potential returns per unit of risk. ABB is currently generating about 0.07 per unit of risk. If you would invest  7.60  in Loop Energy on September 4, 2024 and sell it today you would earn a total of  0.40  from holding Loop Energy or generate 5.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.6%
Values	Daily Returns

Loop Energy  vs.  ABB

Loop Energy

Risk-Adjusted Performance

0 of 100

Very Weak

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

ABB

Risk-Adjusted Performance

2 of 100

Weak

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

Pair Trading with Loop Energy and ABB

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

The idea behind Loop Energy and ABB 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.

Check out your portfolio center.

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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.