Correlation Between Integra LifeSciences and Abbott Laboratories

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

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

Diversification Opportunities for Integra LifeSciences and Abbott Laboratories

0.55

Correlation Coefficient

Integra LifeSciences  Abbott Laboratories

Very weak diversification

The 3 months correlation between Integra and Abbott is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Integra LifeSciences Holdings and Abbott Laboratories in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Abbott Laboratories and Integra LifeSciences 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 Integra LifeSciences Holdings 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 Integra LifeSciences i.e., Integra LifeSciences and Abbott Laboratories go up and down completely randomly.

Pair Corralation between Integra LifeSciences and Abbott Laboratories

Given the investment horizon of 90 days Integra LifeSciences Holdings is expected to under-perform the Abbott Laboratories. In addition to that, Integra LifeSciences is 2.97 times more volatile than Abbott Laboratories. It trades about -0.13 of its total potential returns per unit of risk. Abbott Laboratories is currently generating about -0.31 per unit of volatility. If you would invest  11,726  in Abbott Laboratories on September 22, 2024 and sell it today you would lose (484.00) from holding Abbott Laboratories or give up 4.13% of portfolio value over 90 days.

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

Integra LifeSciences Holdings  vs.  Abbott Laboratories

Integra LifeSciences

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Integra LifeSciences Holdings are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, Integra LifeSciences unveiled solid returns over the last few months and may actually be approaching a breakup point.

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 Integra LifeSciences and Abbott Laboratories

The main advantage of trading using opposite Integra LifeSciences and Abbott Laboratories positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Integra LifeSciences 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 Integra LifeSciences Holdings 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.