Correlation Between Abbott Laboratories and PulmonxCorp

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

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

Diversification Opportunities for Abbott Laboratories and PulmonxCorp

0.25

Correlation Coefficient

Abbott Laboratories  PulmonxCorp

Modest diversification

The 3 months correlation between Abbott and PulmonxCorp is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Abbott Laboratories and PulmonxCorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PulmonxCorp 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 PulmonxCorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PulmonxCorp has no effect on the direction of Abbott Laboratories i.e., Abbott Laboratories and PulmonxCorp go up and down completely randomly.

Pair Corralation between Abbott Laboratories and PulmonxCorp

Considering the 90-day investment horizon Abbott Laboratories is expected to under-perform the PulmonxCorp. But the stock apears to be less risky and, when comparing its historical volatility, Abbott Laboratories is 3.93 times less risky than PulmonxCorp. The stock trades about -0.23 of its potential returns per unit of risk. The PulmonxCorp is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  885.00  in PulmonxCorp on February 5, 2024 and sell it today you would earn a total of  97.00  from holding PulmonxCorp or generate 10.96% return on investment over 90 days.

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

Abbott Laboratories  vs.  PulmonxCorp

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 fundamental drivers, Abbott Laboratories is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

PulmonxCorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PulmonxCorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Abbott Laboratories and PulmonxCorp

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

The idea behind Abbott Laboratories and PulmonxCorp 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.