Correlation Between ECGI Holdings and Abbott Laboratories

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

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

Diversification Opportunities for ECGI Holdings and Abbott Laboratories

0.45

Correlation Coefficient

ECGI Holdings  Abbott Laboratories

Very weak diversification

The 3 months correlation between ECGI and Abbott is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding ECGI Holdings and Abbott Laboratories in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Abbott Laboratories and ECGI Holdings 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 ECGI Holdings are associated (or correlated) with Abbott Laboratories. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Abbott Laboratories has no effect on the direction of ECGI Holdings i.e., ECGI Holdings and Abbott Laboratories go up and down completely randomly.

Pair Corralation between ECGI Holdings and Abbott Laboratories

Given the investment horizon of 90 days ECGI Holdings is expected to generate 9.48 times more return on investment than Abbott Laboratories. However, ECGI Holdings is 9.48 times more volatile than Abbott Laboratories. It trades about 0.14 of its potential returns per unit of risk. Abbott Laboratories is currently generating about -0.08 per unit of risk. If you would invest  0.21  in ECGI Holdings on January 25, 2024 and sell it today you would earn a total of  0.05  from holding ECGI Holdings or generate 23.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

ECGI Holdings  vs.  Abbott Laboratories

ECGI Holdings

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ECGI Holdings are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain technical and fundamental indicators, ECGI Holdings demonstrated solid returns over the last few months and may actually be approaching a breakup point.

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 latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with ECGI Holdings and Abbott Laboratories

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

The idea behind ECGI Holdings and Abbott Laboratories 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.