Correlation Between Stryker and Abbott Laboratories

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

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

Diversification Opportunities for Stryker and Abbott Laboratories

0.62

Correlation Coefficient

Stryker  Abbott Laboratories

Poor diversification

The 3 months correlation between Stryker and Abbott is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Stryker and Abbott Laboratories in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Abbott Laboratories and Stryker 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 Stryker 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 Stryker i.e., Stryker and Abbott Laboratories go up and down completely randomly.

Pair Corralation between Stryker and Abbott Laboratories

Considering the 90-day investment horizon Stryker is expected to generate 12.07 times less return on investment than Abbott Laboratories. But when comparing it to its historical volatility, Stryker is 1.19 times less risky than Abbott Laboratories. It trades about 0.02 of its potential returns per unit of risk. Abbott Laboratories is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  11,221  in Abbott Laboratories on December 28, 2024 and sell it today you would earn a total of  1,861  from holding Abbott Laboratories or generate 16.58% return on investment over 90 days.

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

Stryker  vs.  Abbott Laboratories

Stryker

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Stryker are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Stryker is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Abbott Laboratories

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Abbott Laboratories are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal fundamental drivers, Abbott Laboratories unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Stryker and Abbott Laboratories

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

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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.