Can any of the company-specific risk be diversified away by investing in both Pulmatrix and AbbVie 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 Pulmatrix and AbbVie into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pulmatrix and AbbVie Inc, you can compare the effects of market volatilities on Pulmatrix and AbbVie 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 Pulmatrix with a short position of AbbVie. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pulmatrix and AbbVie.
Diversification Opportunities for Pulmatrix and AbbVie
The 3 months correlation between Pulmatrix and AbbVie is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Pulmatrix and AbbVie Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AbbVie Inc and Pulmatrix 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 Pulmatrix are associated (or correlated) with AbbVie. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AbbVie Inc has no effect on the direction of Pulmatrix i.e., Pulmatrix and AbbVie go up and down completely randomly.
Given the investment horizon of 90 days Pulmatrix is expected to generate 2.64 times more return on investment than AbbVie. However, Pulmatrix is 2.64 times more volatile than AbbVie Inc. It trades about 0.03 of its potential returns per unit of risk. AbbVie Inc is currently generating about -0.11 per unit of risk. If you would invest 190.00 in Pulmatrix on March 5, 2024 and sell it today you would earn a total of 6.00 from holding Pulmatrix or generate 3.16% return on investment over 90 days.
Compared to the overall equity markets, risk-adjusted returns on investments in Pulmatrix are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating essential indicators, Pulmatrix may actually be approaching a critical reversion point that can send shares even higher in July 2024.
Over the last 90 days AbbVie Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's fundamental drivers remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.