Correlation Between South West and AbbVie

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

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

Diversification Opportunities for South West and AbbVie

0.03

Correlation Coefficient

South West  AbbVie

Significant diversification

The 3 months correlation between South and AbbVie is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding South West Pinnacle and AbbVie Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AbbVie Inc and South West 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 South West Pinnacle are associated (or correlated) with AbbVie. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AbbVie Inc has no effect on the direction of South West i.e., South West and AbbVie go up and down completely randomly.

Pair Corralation between South West and AbbVie

Assuming the 90 days trading horizon South West Pinnacle is expected to generate 2.62 times more return on investment than AbbVie. However, South West is 2.62 times more volatile than AbbVie Inc. It trades about 0.05 of its potential returns per unit of risk. AbbVie Inc is currently generating about -0.12 per unit of risk. If you would invest  11,240  in South West Pinnacle on February 4, 2024 and sell it today you would earn a total of  475.00  from holding South West Pinnacle or generate 4.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	88.64%
Values	Daily Returns

South West Pinnacle  vs.  AbbVie Inc

South West Pinnacle

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days South West Pinnacle has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical indicators remain rather sound which may send shares a bit higher in June 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

AbbVie Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AbbVie Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable fundamental drivers, AbbVie is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with South West and AbbVie

The main advantage of trading using opposite South West and AbbVie positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if South West position performs unexpectedly, AbbVie 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 AbbVie will offset losses from the drop in AbbVie's long position.

The idea behind South West Pinnacle and AbbVie Inc 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.