Correlation Between Abbott Laboratories and Accuray Incorporated

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

By analyzing existing cross correlation between Abbott Laboratories and Accuray Incorporated, you can compare the effects of market volatilities on Abbott Laboratories and Accuray Incorporated 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 Accuray Incorporated. Check out your portfolio center. Please also check ongoing floating volatility patterns of Abbott Laboratories and Accuray Incorporated.

Diversification Opportunities for Abbott Laboratories and Accuray Incorporated

0.87

Correlation Coefficient

Abbott Laboratories  Accuray Incorporated

Very poor diversification

The 3 months correlation between Abbott and Accuray is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Abbott Laboratories and Accuray Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Accuray Incorporated 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 Accuray Incorporated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Accuray Incorporated has no effect on the direction of Abbott Laboratories i.e., Abbott Laboratories and Accuray Incorporated go up and down completely randomly.

Pair Corralation between Abbott Laboratories and Accuray Incorporated

Considering the 90-day investment horizon Abbott Laboratories is expected to under-perform the Accuray Incorporated. But the stock apears to be less risky and, when comparing its historical volatility, Abbott Laboratories is 2.8 times less risky than Accuray Incorporated. The stock trades about 0.0 of its potential returns per unit of risk. The Accuray Incorporated is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  204.00  in Accuray Incorporated on February 26, 2024 and sell it today you would lose (53.00) from holding Accuray Incorporated or give up 25.98% of portfolio value over 90 days.

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

Abbott Laboratories  vs.  Accuray Incorporated

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 latest abnormal performance, the Stock's fundamental drivers remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Accuray Incorporated

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Accuray Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Abbott Laboratories and Accuray Incorporated

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

The idea behind Abbott Laboratories and Accuray Incorporated 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.