Correlation Between ABBOTT and Carsales

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

By analyzing existing cross correlation between ABBOTT LABS 53 and CarsalesCom Ltd ADR, you can compare the effects of market volatilities on ABBOTT and Carsales 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 ABBOTT with a short position of Carsales. Check out your portfolio center. Please also check ongoing floating volatility patterns of ABBOTT and Carsales.

Diversification Opportunities for ABBOTT and Carsales

-0.21

Correlation Coefficient

ABBOTT  Carsales

Very good diversification

The 3 months correlation between ABBOTT and Carsales is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding ABBOTT LABS 53 and CarsalesCom Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CarsalesCom ADR and ABBOTT 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 ABBOTT LABS 53 are associated (or correlated) with Carsales. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CarsalesCom ADR has no effect on the direction of ABBOTT i.e., ABBOTT and Carsales go up and down completely randomly.

Pair Corralation between ABBOTT and Carsales

Assuming the 90 days trading horizon ABBOTT LABS 53 is expected to generate 0.27 times more return on investment than Carsales. However, ABBOTT LABS 53 is 3.68 times less risky than Carsales. It trades about 0.06 of its potential returns per unit of risk. CarsalesCom Ltd ADR is currently generating about -0.01 per unit of risk. If you would invest  10,086  in ABBOTT LABS 53 on December 31, 2024 and sell it today you would earn a total of  351.00  from holding ABBOTT LABS 53 or generate 3.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

ABBOTT LABS 53  vs.  CarsalesCom Ltd ADR

ABBOTT LABS 53

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ABBOTT LABS 53 are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, ABBOTT is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

CarsalesCom ADR

Risk-Adjusted Performance

Very Weak

Over the last 90 days CarsalesCom Ltd ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Carsales is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with ABBOTT and Carsales

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

The idea behind ABBOTT LABS 53 and CarsalesCom Ltd ADR 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.