Correlation Between Real Heart and ABB

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

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

Diversification Opportunities for Real Heart and ABB

-0.55

Correlation Coefficient

Real Heart  ABB

Excellent diversification

The 3 months correlation between Real and ABB is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Real Heart and ABB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ABB and Real Heart 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 Real Heart 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 Real Heart i.e., Real Heart and ABB go up and down completely randomly.

Pair Corralation between Real Heart and ABB

Assuming the 90 days trading horizon Real Heart is expected to under-perform the ABB. In addition to that, Real Heart is 1.89 times more volatile than ABB. It trades about -0.02 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 Against
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Real Heart  vs.  ABB

Real Heart

Risk-Adjusted Performance

Very Weak

Over the last 90 days Real Heart has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Real Heart is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

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 Real Heart and ABB

The main advantage of trading using opposite Real Heart and ABB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Real Heart 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 Real Heart 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.