Correlation Between Addtech AB and ABB

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

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

Diversification Opportunities for Addtech AB and ABB

0.53

Correlation Coefficient

Addtech AB  ABB

Very weak diversification

The 3 months correlation between Addtech and ABB is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Addtech AB and ABB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ABB and Addtech AB 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 Addtech AB 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 Addtech AB i.e., Addtech AB and ABB go up and down completely randomly.

Pair Corralation between Addtech AB and ABB

Assuming the 90 days trading horizon Addtech AB is expected to generate 2.37 times less return on investment than ABB. In addition to that, Addtech AB is 1.09 times more volatile than ABB. It trades about 0.09 of its total potential returns per unit of risk. ABB is currently generating about 0.24 per unit of volatility. If you would invest  49,220  in ABB on April 23, 2025 and sell it today you would earn a total of  13,900  from holding ABB or generate 28.24% return on investment over 90 days.

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

Addtech AB  vs.  ABB

Addtech AB

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Addtech AB are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain fundamental indicators, Addtech AB may actually be approaching a critical reversion point that can send shares even higher in August 2025.

ABB

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ABB are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental drivers, ABB unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Addtech AB and ABB

The main advantage of trading using opposite Addtech AB and ABB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Addtech AB 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 Addtech AB 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.