Correlation Between Danaher and ABB
Can any of the company-specific risk be diversified away by investing in both Danaher 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 Danaher and ABB into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Danaher and ABB Ltd ADR, you can compare the effects of market volatilities on Danaher 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 Danaher with a short position of ABB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Danaher and ABB.
Diversification Opportunities for Danaher and ABB
Modest diversification
The 3 months correlation between Danaher and ABB is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Danaher and ABB Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ABB Ltd ADR and Danaher 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 Danaher 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 Ltd ADR has no effect on the direction of Danaher i.e., Danaher and ABB go up and down completely randomly.
Pair Corralation between Danaher and ABB
If you would invest 24,753 in Danaher on January 25, 2024 and sell it today you would earn a total of 558.00 from holding Danaher or generate 2.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 4.55% |
| Values | Daily Returns |
Danaher vs. ABB Ltd ADR
Performance |
| Timeline |
| Danaher |
| ABB Ltd ADR |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Danaher and ABB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Danaher and ABB
The main advantage of trading using opposite Danaher and ABB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Danaher 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.| Danaher vs. Fonar | Danaher vs. Burning Rock BiotechLtd | Danaher vs. Sera Prognostics | Danaher vs. Psychemedics |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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