Correlation Between Marlowe Plc and ABB

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

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

Diversification Opportunities for Marlowe Plc and ABB

-0.3

Correlation Coefficient

Marlowe Plc  ABB

Very good diversification

The 3 months correlation between Marlowe and ABB is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Marlowe plc and ABB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ABB and Marlowe Plc 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 Marlowe plc 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 Marlowe Plc i.e., Marlowe Plc and ABB go up and down completely randomly.

Pair Corralation between Marlowe Plc and ABB

Assuming the 90 days horizon Marlowe plc is expected to under-perform the ABB. In addition to that, Marlowe Plc is 2.58 times more volatile than ABB. It trades about -0.04 of its total potential returns per unit of risk. ABB is currently generating about 0.02 per unit of volatility. If you would invest  5,734  in ABB on September 13, 2024 and sell it today you would earn a total of  21.00  from holding ABB or generate 0.37% return on investment over 90 days.

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

Marlowe plc  vs.  ABB

Marlowe plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Marlowe plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal 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.

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 Marlowe Plc and ABB

The main advantage of trading using opposite Marlowe Plc and ABB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Marlowe Plc 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 Marlowe plc 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.