Correlation Between ABB and Prysmian SPA
Can any of the company-specific risk be diversified away by investing in both ABB and Prysmian SPA 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 ABB and Prysmian SPA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ABB Ltd ADR and Prysmian SPA ADR, you can compare the effects of market volatilities on ABB and Prysmian SPA 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 ABB with a short position of Prysmian SPA. Check out your portfolio center. Please also check ongoing floating volatility patterns of ABB and Prysmian SPA.
Diversification Opportunities for ABB and Prysmian SPA
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between ABB and Prysmian is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding ABB Ltd ADR and Prysmian SPA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prysmian SPA ADR and ABB 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 ABB Ltd ADR are associated (or correlated) with Prysmian SPA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prysmian SPA ADR has no effect on the direction of ABB i.e., ABB and Prysmian SPA go up and down completely randomly.
Pair Corralation between ABB and Prysmian SPA
If you would invest 3,900 in ABB Ltd ADR on January 24, 2024 and sell it today you would earn a total of 0.00 from holding ABB Ltd ADR or generate 0.0% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 5.0% |
Values | Daily Returns |
ABB Ltd ADR vs. Prysmian SPA ADR
Performance |
Timeline |
ABB Ltd ADR |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Prysmian SPA ADR |
ABB and Prysmian SPA Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with ABB and Prysmian SPA
The main advantage of trading using opposite ABB and Prysmian SPA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ABB position performs unexpectedly, Prysmian SPA 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 Prysmian SPA will offset losses from the drop in Prysmian SPA's long position.The idea behind ABB Ltd ADR and Prysmian SPA ADR 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.Prysmian SPA vs. Sunrise New Energy | Prysmian SPA vs. Energizer Holdings | Prysmian SPA vs. Alfen NV | Prysmian SPA vs. Eguana Technologies |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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