Correlation Between Abbott Laboratories and MSAD Insurance

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Can any of the company-specific risk be diversified away by investing in both Abbott Laboratories and MSAD Insurance 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 MSAD Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Abbott Laboratories and MSAD Insurance Group, you can compare the effects of market volatilities on Abbott Laboratories and MSAD Insurance 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 MSAD Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Abbott Laboratories and MSAD Insurance.

Diversification Opportunities for Abbott Laboratories and MSAD Insurance

0.61
  Correlation Coefficient

Poor diversification

The 3 months correlation between Abbott and MSAD is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Abbott Laboratories and MSAD Insurance Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MSAD Insurance Group 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 MSAD Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MSAD Insurance Group has no effect on the direction of Abbott Laboratories i.e., Abbott Laboratories and MSAD Insurance go up and down completely randomly.

Pair Corralation between Abbott Laboratories and MSAD Insurance

Considering the 90-day investment horizon Abbott Laboratories is expected to under-perform the MSAD Insurance. But the stock apears to be less risky and, when comparing its historical volatility, Abbott Laboratories is 1.71 times less risky than MSAD Insurance. The stock trades about -0.18 of its potential returns per unit of risk. The MSAD Insurance Group is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest  2,357  in MSAD Insurance Group on December 29, 2023 and sell it today you would earn a total of  348.00  from holding MSAD Insurance Group or generate 14.76% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Abbott Laboratories  vs.  MSAD Insurance Group

 Performance 
       Timeline  
Abbott Laboratories 

Risk-Adjusted Performance

4 of 100

 
Low
 
High
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Abbott Laboratories are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental drivers, Abbott Laboratories is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.
MSAD Insurance Group 

Risk-Adjusted Performance

18 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in MSAD Insurance Group are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental indicators, MSAD Insurance showed solid returns over the last few months and may actually be approaching a breakup point.

Abbott Laboratories and MSAD Insurance Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Abbott Laboratories and MSAD Insurance

The main advantage of trading using opposite Abbott Laboratories and MSAD Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Abbott Laboratories position performs unexpectedly, MSAD Insurance 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 MSAD Insurance will offset losses from the drop in MSAD Insurance's long position.
The idea behind Abbott Laboratories and MSAD Insurance Group 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.
Check out your portfolio center.
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.

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