Correlation Between AbbVie and IDEX
Can any of the company-specific risk be diversified away by investing in both AbbVie and IDEX 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 IDEX into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AbbVie Inc and IDEX Corporation, you can compare the effects of market volatilities on AbbVie and IDEX 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 IDEX. Check out your portfolio center. Please also check ongoing floating volatility patterns of AbbVie and IDEX.
Diversification Opportunities for AbbVie and IDEX
Poor diversification
The 3 months correlation between AbbVie and IDEX is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding AbbVie Inc and IDEX Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IDEX 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 IDEX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IDEX has no effect on the direction of AbbVie i.e., AbbVie and IDEX go up and down completely randomly.
Pair Corralation between AbbVie and IDEX
Given the investment horizon of 90 days AbbVie Inc is expected to generate 1.44 times more return on investment than IDEX. However, AbbVie is 1.44 times more volatile than IDEX Corporation. It trades about -0.18 of its potential returns per unit of risk. IDEX Corporation is currently generating about -0.29 per unit of risk. If you would invest 17,464 in AbbVie Inc on January 20, 2024 and sell it today you would lose (998.00) from holding AbbVie Inc or give up 5.71% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
AbbVie Inc vs. IDEX Corp.
Performance |
| Timeline |
| AbbVie Inc |
| IDEX |
AbbVie and IDEX Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AbbVie and IDEX
The main advantage of trading using opposite AbbVie and IDEX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AbbVie position performs unexpectedly, IDEX 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 IDEX will offset losses from the drop in IDEX's long position.| AbbVie vs. Merck Company | AbbVie vs. Pfizer Inc | AbbVie vs. Eli Lilly and | AbbVie vs. Bristol Myers Squibb |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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