Correlation Between FIREWEED METALS and Abbott Laboratories

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

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

Diversification Opportunities for FIREWEED METALS and Abbott Laboratories

-0.4

Correlation Coefficient

FIREWEED METALS  Abbott Laboratories

Very good diversification

The 3 months correlation between FIREWEED and Abbott is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding FIREWEED METALS P and Abbott Laboratories in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Abbott Laboratories and FIREWEED METALS 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 FIREWEED METALS P 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 FIREWEED METALS i.e., FIREWEED METALS and Abbott Laboratories go up and down completely randomly.

Pair Corralation between FIREWEED METALS and Abbott Laboratories

Assuming the 90 days horizon FIREWEED METALS P is expected to under-perform the Abbott Laboratories. In addition to that, FIREWEED METALS is 2.39 times more volatile than Abbott Laboratories. It trades about -0.01 of its total potential returns per unit of risk. Abbott Laboratories is currently generating about 0.0 per unit of volatility. If you would invest  10,752  in Abbott Laboratories on October 23, 2024 and sell it today you would lose (46.00) from holding Abbott Laboratories or give up 0.43% of portfolio value over 90 days.

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

FIREWEED METALS P  vs.  Abbott Laboratories

FIREWEED METALS P

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FIREWEED METALS P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, FIREWEED METALS 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

0 of 100

Very Weak

Over the last 90 days Abbott Laboratories has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable essential indicators, Abbott Laboratories is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with FIREWEED METALS and Abbott Laboratories

The main advantage of trading using opposite FIREWEED METALS and Abbott Laboratories positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FIREWEED METALS 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 FIREWEED METALS P 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 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.