Correlation Between Ads Tec and ABB

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

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

Diversification Opportunities for Ads Tec and ABB

0.1

Correlation Coefficient

Ads Tec  ABB

Average diversification

The 3 months correlation between Ads and ABB is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Ads Tec Energy and ABB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ABB and Ads Tec 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 Ads Tec Energy 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 has no effect on the direction of Ads Tec i.e., Ads Tec and ABB go up and down completely randomly.

Pair Corralation between Ads Tec and ABB

Given the investment horizon of 90 days Ads Tec is expected to generate 1.05 times less return on investment than ABB. But when comparing it to its historical volatility, Ads Tec Energy is 1.1 times less risky than ABB. It trades about 0.09 of its potential returns per unit of risk. ABB is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  5,575  in ABB on September 13, 2024 and sell it today you would earn a total of  180.00  from holding ABB or generate 3.23% return on investment over 90 days.

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

Ads Tec Energy  vs.  ABB

Ads Tec Energy

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ads Tec Energy are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Ads Tec may actually be approaching a critical reversion point that can send shares even higher in January 2025.

ABB

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ABB are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, ABB is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Ads Tec and ABB

The main advantage of trading using opposite Ads Tec and ABB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ads Tec 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.

The idea behind Ads Tec Energy and ABB 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..