Correlation Between Advanced Energy and ABB
Can any of the company-specific risk be diversified away by investing in both Advanced Energy and ABB 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 Advanced Energy and ABB into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Advanced Energy Industries and ABB Ltd ADR, you can compare the effects of market volatilities on Advanced Energy and ABB 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 Advanced Energy with a short position of ABB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Advanced Energy and ABB.
Diversification Opportunities for Advanced Energy and ABB
-0.83 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Advanced and ABB is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Advanced Energy Industries and ABB Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ABB Ltd ADR and Advanced Energy 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 Advanced Energy Industries are associated (or correlated) with ABB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ABB Ltd ADR has no effect on the direction of Advanced Energy i.e., Advanced Energy and ABB go up and down completely randomly.
Pair Corralation between Advanced Energy and ABB
If you would invest 3,900 in ABB Ltd ADR on January 26, 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 Against |
Strength | Significant |
Accuracy | 4.76% |
Values | Daily Returns |
Advanced Energy Industries vs. ABB Ltd ADR
Performance |
Timeline |
Advanced Energy Indu |
ABB Ltd ADR |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Advanced Energy and ABB Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Advanced Energy and ABB
The main advantage of trading using opposite Advanced Energy and ABB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Advanced Energy position performs unexpectedly, ABB 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 ABB will offset losses from the drop in ABB's long position.Advanced Energy vs. Hayward Holdings | Advanced Energy vs. Hollysys Automation Technologies | Advanced Energy vs. Enersys | Advanced Energy vs. Espey Mfg Electronics |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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