Correlation Between Vestas Wind and ABB
Can any of the company-specific risk be diversified away by investing in both Vestas Wind 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 Vestas Wind and ABB into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vestas Wind Systems and ABB Ltd ADR, you can compare the effects of market volatilities on Vestas Wind 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 Vestas Wind with a short position of ABB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vestas Wind and ABB.
Diversification Opportunities for Vestas Wind and ABB
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Vestas and ABB is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Vestas Wind Systems and ABB Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ABB Ltd ADR and Vestas Wind 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 Vestas Wind Systems 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 Ltd ADR has no effect on the direction of Vestas Wind i.e., Vestas Wind and ABB go up and down completely randomly.
Pair Corralation between Vestas Wind and ABB
If you would invest 3,900 in ABB Ltd ADR on January 20, 2024 and sell it today you would earn a total of 0.00 from holding ABB Ltd ADR or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 4.55% |
| Values | Daily Returns |
Vestas Wind Systems vs. ABB Ltd ADR
Performance |
| Timeline |
| Vestas Wind Systems |
| ABB Ltd ADR |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Vestas Wind and ABB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vestas Wind and ABB
The main advantage of trading using opposite Vestas Wind and ABB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vestas Wind 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.| Vestas Wind vs. GE Aerospace | Vestas Wind vs. Eaton PLC | Vestas Wind vs. Illinois Tool Works | Vestas Wind vs. Parker Hannifin |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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