Correlation Between Escalon Medical and Abbott Laboratories

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

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

Diversification Opportunities for Escalon Medical and Abbott Laboratories

0.19

Correlation Coefficient

Escalon Medical  Abbott Laboratories

Average diversification

The 3 months correlation between Escalon and Abbott is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Escalon Medical Corp and Abbott Laboratories in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Abbott Laboratories and Escalon Medical 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 Escalon Medical Corp 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 Escalon Medical i.e., Escalon Medical and Abbott Laboratories go up and down completely randomly.

Pair Corralation between Escalon Medical and Abbott Laboratories

If you would invest  6.00  in Escalon Medical Corp on January 26, 2024 and sell it today you would earn a total of  0.00  from holding Escalon Medical Corp or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	1.61%
Values	Daily Returns

Escalon Medical Corp  vs.  Abbott Laboratories

Escalon Medical Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Escalon Medical Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, Escalon Medical is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

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.

Pair Trading with Escalon Medical and Abbott Laboratories

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

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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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.