Correlation Between Abbott Laboratories and EDAP TMS
Can any of the company-specific risk be diversified away by investing in both Abbott Laboratories and EDAP TMS 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 Laboratories and EDAP TMS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Abbott Laboratories and EDAP TMS SA, you can compare the effects of market volatilities on Abbott Laboratories and EDAP TMS 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 Laboratories with a short position of EDAP TMS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Abbott Laboratories and EDAP TMS.
Diversification Opportunities for Abbott Laboratories and EDAP TMS
-0.21 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Abbott and EDAP is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Abbott Laboratories and EDAP TMS SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EDAP TMS SA and Abbott Laboratories 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 Laboratories are associated (or correlated) with EDAP TMS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EDAP TMS SA has no effect on the direction of Abbott Laboratories i.e., Abbott Laboratories and EDAP TMS go up and down completely randomly.
Pair Corralation between Abbott Laboratories and EDAP TMS
Considering the 90-day investment horizon Abbott Laboratories is expected to under-perform the EDAP TMS. But the stock apears to be less risky and, when comparing its historical volatility, Abbott Laboratories is 2.02 times less risky than EDAP TMS. The stock trades about -0.12 of its potential returns per unit of risk. The EDAP TMS SA is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 740.00 in EDAP TMS SA on January 21, 2024 and sell it today you would lose (14.00) from holding EDAP TMS SA or give up 1.89% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Abbott Laboratories vs. EDAP TMS SA
Performance |
Timeline |
Abbott Laboratories |
EDAP TMS SA |
Abbott Laboratories and EDAP TMS Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Abbott Laboratories and EDAP TMS
The main advantage of trading using opposite Abbott Laboratories and EDAP TMS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Abbott Laboratories position performs unexpectedly, EDAP TMS 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 EDAP TMS will offset losses from the drop in EDAP TMS's long position.Abbott Laboratories vs. Agilent Technologies | Abbott Laboratories vs. Illumina | Abbott Laboratories vs. Waters | Abbott Laboratories vs. Thermo Fisher Scientific |
EDAP TMS vs. Agilent Technologies | EDAP TMS vs. Illumina | EDAP TMS vs. Waters | EDAP TMS vs. Thermo Fisher Scientific |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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