Correlation Between Forbo Holding and ABB

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

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

Diversification Opportunities for Forbo Holding and ABB

0.86

Correlation Coefficient

Forbo Holding  ABB

Very poor diversification

The 3 months correlation between Forbo and ABB is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Forbo Holding AG and ABB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ABB and Forbo 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 Forbo Holding AG 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 Forbo Holding i.e., Forbo Holding and ABB go up and down completely randomly.

Pair Corralation between Forbo Holding and ABB

Assuming the 90 days trading horizon Forbo Holding is expected to generate 1.26 times less return on investment than ABB. In addition to that, Forbo Holding is 1.06 times more volatile than ABB. It trades about 0.16 of its total potential returns per unit of risk. ABB is currently generating about 0.21 per unit of volatility. If you would invest  4,130  in ABB on April 22, 2025 and sell it today you would earn a total of  1,094  from holding ABB or generate 26.49% return on investment over 90 days.

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

Forbo Holding AG  vs.  ABB

Forbo Holding AG

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Forbo Holding AG are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Forbo Holding showed solid returns over the last few months and may actually be approaching a breakup point.

ABB

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ABB are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, ABB showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Forbo Holding and ABB

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

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 Money Managers module to screen money managers from public funds and ETFs managed around the world.