Correlation Between Signify NV and ABB

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

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

Diversification Opportunities for Signify NV and ABB

0.64

Correlation Coefficient

Signify NV  ABB

Poor diversification

The 3 months correlation between Signify and ABB is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Signify NV and ABB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ABB and Signify NV 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 Signify NV 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 Signify NV i.e., Signify NV and ABB go up and down completely randomly.

Pair Corralation between Signify NV and ABB

Assuming the 90 days horizon Signify NV is expected to generate 1.02 times less return on investment than ABB. But when comparing it to its historical volatility, Signify NV is 1.31 times less risky than ABB. It trades about 0.23 of its potential returns per unit of risk. ABB is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  4,469  in ABB on May 6, 2025 and sell it today you would earn a total of  883.00  from holding ABB or generate 19.76% return on investment over 90 days.

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

Signify NV  vs.  ABB

Signify NV

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Signify NV are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Signify NV reported solid returns over the last few months and may actually be approaching a breakup point.

ABB

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ABB are ranked lower than 13 (%) 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 Signify NV and ABB

The main advantage of trading using opposite Signify NV and ABB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Signify NV 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 Signify NV 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.