Correlation Between Abbott Laboratories and Novacyt SA

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

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

Diversification Opportunities for Abbott Laboratories and Novacyt SA

-0.44

Correlation Coefficient

Abbott Laboratories  Novacyt SA

Very good diversification

The 3 months correlation between Abbott and Novacyt is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Abbott Laboratories and Novacyt SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novacyt SA 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 Novacyt SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Novacyt SA has no effect on the direction of Abbott Laboratories i.e., Abbott Laboratories and Novacyt SA go up and down completely randomly.

Pair Corralation between Abbott Laboratories and Novacyt SA

Considering the 90-day investment horizon Abbott Laboratories is expected to generate 0.22 times more return on investment than Novacyt SA. However, Abbott Laboratories is 4.61 times less risky than Novacyt SA. It trades about 0.03 of its potential returns per unit of risk. Novacyt SA is currently generating about -0.12 per unit of risk. If you would invest  11,347  in Abbott Laboratories on September 30, 2024 and sell it today you would earn a total of  152.00  from holding Abbott Laboratories or generate 1.34% return on investment over 90 days.

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

Abbott Laboratories  vs.  Novacyt SA

Abbott Laboratories

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Abbott Laboratories are ranked lower than 2 (%) 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 latest stock price uproar, may contribute to short-horizon losses for the private investors.

Novacyt SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Novacyt SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Abbott Laboratories and Novacyt SA

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

The idea behind Abbott Laboratories and Novacyt SA 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.