Correlation Between St Galler and ABB

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

By analyzing existing cross correlation between St Galler Kantonalbank and ABB, you can compare the effects of market volatilities on St Galler 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 St Galler with a short position of ABB. Check out your portfolio center. Please also check ongoing floating volatility patterns of St Galler and ABB.

Diversification Opportunities for St Galler and ABB

-0.84

Correlation Coefficient

St Galler  ABB

Pay attention - limited upside

The 3 months correlation between SGKN and ABB is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding St Galler Kantonalbank and ABB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ABB and St Galler 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 St Galler Kantonalbank 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 has no effect on the direction of St Galler i.e., St Galler and ABB go up and down completely randomly.

Pair Corralation between St Galler and ABB

Assuming the 90 days trading horizon St Galler Kantonalbank is expected to under-perform the ABB. But the stock apears to be less risky and, when comparing its historical volatility, St Galler Kantonalbank is 2.11 times less risky than ABB. The stock trades about -0.13 of its potential returns per unit of risk. The ABB is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  4,165  in ABB on February 1, 2024 and sell it today you would earn a total of  324.00  from holding ABB or generate 7.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

St Galler Kantonalbank  vs.  ABB

St Galler Kantonalbank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days St Galler Kantonalbank has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, St Galler is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

ABB

Risk-Adjusted Performance

23 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in ABB are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, ABB showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with St Galler and ABB

The main advantage of trading using opposite St Galler and ABB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if St Galler 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.

The idea behind St Galler Kantonalbank and ABB 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.