Correlation Between AbbVie and Ambow Education
Can any of the company-specific risk be diversified away by investing in both AbbVie and Ambow Education 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 AbbVie and Ambow Education into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AbbVie Inc and Ambow Education Holding, you can compare the effects of market volatilities on AbbVie and Ambow Education 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 AbbVie with a short position of Ambow Education. Check out your portfolio center. Please also check ongoing floating volatility patterns of AbbVie and Ambow Education.
Diversification Opportunities for AbbVie and Ambow Education
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between AbbVie and Ambow is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding AbbVie Inc and Ambow Education Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ambow Education Holding and AbbVie 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 AbbVie Inc are associated (or correlated) with Ambow Education. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ambow Education Holding has no effect on the direction of AbbVie i.e., AbbVie and Ambow Education go up and down completely randomly.
Pair Corralation between AbbVie and Ambow Education
Given the investment horizon of 90 days AbbVie Inc is expected to generate 0.23 times more return on investment than Ambow Education. However, AbbVie Inc is 4.33 times less risky than Ambow Education. It trades about -0.16 of its potential returns per unit of risk. Ambow Education Holding is currently generating about -0.16 per unit of risk. If you would invest 17,688 in AbbVie Inc on January 23, 2024 and sell it today you would lose (899.00) from holding AbbVie Inc or give up 5.08% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
AbbVie Inc vs. Ambow Education Holding
Performance |
| Timeline |
| AbbVie Inc |
| Ambow Education Holding |
AbbVie and Ambow Education Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AbbVie and Ambow Education
The main advantage of trading using opposite AbbVie and Ambow Education positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AbbVie position performs unexpectedly, Ambow Education 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 Ambow Education will offset losses from the drop in Ambow Education's long position.| AbbVie vs. Merck Company | AbbVie vs. Pfizer Inc | AbbVie vs. Eli Lilly and | AbbVie vs. Bristol Myers Squibb |
| Ambow Education vs. Vasta PlatformLtd | Ambow Education vs. Sunlands Technology Group | Ambow Education vs. Cogna Educacao SA | Ambow Education vs. American Public Education |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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