Correlation Between Sonova Holding and Abbott Laboratories

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Can any of the company-specific risk be diversified away by investing in both Sonova Holding 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 Sonova Holding and Abbott Laboratories into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sonova Holding AG and Abbott Laboratories, you can compare the effects of market volatilities on Sonova Holding 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 Sonova Holding with a short position of Abbott Laboratories. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sonova Holding and Abbott Laboratories.

Diversification Opportunities for Sonova Holding and Abbott Laboratories

0.1
  Correlation Coefficient

Average diversification

The 3 months correlation between Sonova and Abbott is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Sonova Holding AG and Abbott Laboratories in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Abbott Laboratories and Sonova Holding 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 Sonova Holding AG 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 Sonova Holding i.e., Sonova Holding and Abbott Laboratories go up and down completely randomly.

Pair Corralation between Sonova Holding and Abbott Laboratories

Assuming the 90 days horizon Sonova Holding AG is expected to under-perform the Abbott Laboratories. In addition to that, Sonova Holding is 1.57 times more volatile than Abbott Laboratories. It trades about -0.24 of its total potential returns per unit of risk. Abbott Laboratories is currently generating about -0.18 per unit of volatility. If you would invest  11,940  in Abbott Laboratories on December 29, 2023 and sell it today you would lose (592.00) from holding Abbott Laboratories or give up 4.96% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy95.65%
ValuesDaily Returns

Sonova Holding AG  vs.  Abbott Laboratories

 Performance 
       Timeline  
Sonova Holding AG 

Risk-Adjusted Performance

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Over the last 90 days Sonova Holding AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.
Abbott Laboratories 

Risk-Adjusted Performance

4 of 100

 
Low
 
High
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Abbott Laboratories are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental drivers, Abbott Laboratories is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Sonova Holding and Abbott Laboratories Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Sonova Holding and Abbott Laboratories

The main advantage of trading using opposite Sonova Holding and Abbott Laboratories positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sonova Holding 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 Sonova Holding AG 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.
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.

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