Correlation Between AbbVie and Adaptive Biotechnologies

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

By analyzing existing cross correlation between AbbVie Inc and Adaptive Biotechnologies Corp, you can compare the effects of market volatilities on AbbVie and Adaptive Biotechnologies 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 Adaptive Biotechnologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of AbbVie and Adaptive Biotechnologies.

Diversification Opportunities for AbbVie and Adaptive Biotechnologies

-0.05

Correlation Coefficient

AbbVie  Adaptive Biotechnologies

Good diversification

The 3 months correlation between AbbVie and Adaptive is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding AbbVie Inc and Adaptive Biotechnologies Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adaptive Biotechnologies 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 Adaptive Biotechnologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adaptive Biotechnologies has no effect on the direction of AbbVie i.e., AbbVie and Adaptive Biotechnologies go up and down completely randomly.

Pair Corralation between AbbVie and Adaptive Biotechnologies

Given the investment horizon of 90 days AbbVie Inc is expected to generate 0.22 times more return on investment than Adaptive Biotechnologies. However, AbbVie Inc is 4.64 times less risky than Adaptive Biotechnologies. It trades about -0.18 of its potential returns per unit of risk. Adaptive Biotechnologies Corp is currently generating about -0.22 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 Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

AbbVie Inc  vs.  Adaptive Biotechnologies Corp

AbbVie Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AbbVie Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable fundamental drivers, AbbVie is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Adaptive Biotechnologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Adaptive Biotechnologies Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in May 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with AbbVie and Adaptive Biotechnologies

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

The idea behind AbbVie Inc and Adaptive Biotechnologies Corp 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.