Correlation Between ABIOMED and Medtronic PLC

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

By analyzing existing cross correlation between ABIOMED and Medtronic PLC, you can compare the effects of market volatilities on ABIOMED and Medtronic PLC 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 ABIOMED with a short position of Medtronic PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of ABIOMED and Medtronic PLC.

Diversification Opportunities for ABIOMED and Medtronic PLC

0.4

Correlation Coefficient

ABIOMED  Medtronic PLC

Very weak diversification

The 3 months correlation between ABIOMED and Medtronic is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding ABIOMED and Medtronic PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medtronic PLC and ABIOMED 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 ABIOMED are associated (or correlated) with Medtronic PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medtronic PLC has no effect on the direction of ABIOMED i.e., ABIOMED and Medtronic PLC go up and down completely randomly.

Pair Corralation between ABIOMED and Medtronic PLC

If you would invest (100.00) in ABIOMED on January 20, 2024 and sell it today you would earn a total of  100.00  from holding ABIOMED or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	0.0%
Values	Daily Returns

ABIOMED  vs.  Medtronic PLC

ABIOMED

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ABIOMED has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, ABIOMED is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Medtronic PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Medtronic PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with ABIOMED and Medtronic PLC

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

The idea behind ABIOMED and Medtronic PLC 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.

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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.