Correlation Between Abbott Laboratories and Aesthetic Medical

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

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

Diversification Opportunities for Abbott Laboratories and Aesthetic Medical

0.2

Correlation Coefficient

Abbott Laboratories  Aesthetic Medical

Modest diversification

The 3 months correlation between Abbott and Aesthetic is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Abbott Laboratories and Aesthetic Medical Intl in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aesthetic Medical Intl and Abbott Laboratories 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 Abbott Laboratories are associated (or correlated) with Aesthetic Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aesthetic Medical Intl has no effect on the direction of Abbott Laboratories i.e., Abbott Laboratories and Aesthetic Medical go up and down completely randomly.

Pair Corralation between Abbott Laboratories and Aesthetic Medical

Considering the 90-day investment horizon Abbott Laboratories is expected to under-perform the Aesthetic Medical. But the stock apears to be less risky and, when comparing its historical volatility, Abbott Laboratories is 8.09 times less risky than Aesthetic Medical. The stock trades about -0.12 of its potential returns per unit of risk. The Aesthetic Medical Intl is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  35.00  in Aesthetic Medical Intl on January 20, 2024 and sell it today you would earn a total of  4.00  from holding Aesthetic Medical Intl or generate 11.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Abbott Laboratories  vs.  Aesthetic Medical Intl

Abbott Laboratories

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Abbott Laboratories has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental drivers, Abbott Laboratories is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Aesthetic Medical Intl

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aesthetic Medical Intl has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's forward indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Abbott Laboratories and Aesthetic Medical

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

The idea behind Abbott Laboratories and Aesthetic Medical Intl 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.