Correlation Between Abbott Laboratories and Regeneron Pharmaceuticals

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

Diversification Opportunities for Abbott Laboratories and Regeneron Pharmaceuticals

0.7
  Correlation Coefficient

Poor diversification

The 3 months correlation between Abbott and Regeneron is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Abbott Laboratories and Regeneron Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Regeneron Pharmaceuticals 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 Regeneron Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Regeneron Pharmaceuticals has no effect on the direction of Abbott Laboratories i.e., Abbott Laboratories and Regeneron Pharmaceuticals go up and down completely randomly.

Pair Corralation between Abbott Laboratories and Regeneron Pharmaceuticals

Considering the 90-day investment horizon Abbott Laboratories is expected to generate 70.2 times less return on investment than Regeneron Pharmaceuticals. But when comparing it to its historical volatility, Abbott Laboratories is 1.27 times less risky than Regeneron Pharmaceuticals. It trades about 0.0 of its potential returns per unit of risk. Regeneron Pharmaceuticals is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  73,884  in Regeneron Pharmaceuticals on December 29, 2023 and sell it today you would earn a total of  22,746  from holding Regeneron Pharmaceuticals or generate 30.79% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Abbott Laboratories  vs.  Regeneron Pharmaceuticals

 Performance 
       Timeline  
Abbott Laboratories 

Risk-Adjusted Performance

4 of 100

 
Low
 
High
Weak
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 latest stock price uproar, may contribute to short-horizon losses for the private investors.
Regeneron Pharmaceuticals 

Risk-Adjusted Performance

13 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Regeneron Pharmaceuticals are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very weak technical and fundamental indicators, Regeneron Pharmaceuticals may actually be approaching a critical reversion point that can send shares even higher in April 2024.

Abbott Laboratories and Regeneron Pharmaceuticals Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Abbott Laboratories and Regeneron Pharmaceuticals

The main advantage of trading using opposite Abbott Laboratories and Regeneron Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Abbott Laboratories position performs unexpectedly, Regeneron Pharmaceuticals 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 Regeneron Pharmaceuticals will offset losses from the drop in Regeneron Pharmaceuticals' long position.
The idea behind Abbott Laboratories and Regeneron Pharmaceuticals 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.

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