Correlation Between American Nortel and ABB
Can any of the company-specific risk be diversified away by investing in both American Nortel 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 American Nortel and ABB into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Nortel Communications and ABB, you can compare the effects of market volatilities on American Nortel 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 American Nortel with a short position of ABB. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Nortel and ABB.
Diversification Opportunities for American Nortel and ABB
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between American and ABB is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding American Nortel Communications and ABB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ABB and American Nortel 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 American Nortel Communications 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 American Nortel i.e., American Nortel and ABB go up and down completely randomly.
Pair Corralation between American Nortel and ABB
Given the investment horizon of 90 days American Nortel Communications is expected to generate 5.73 times more return on investment than ABB. However, American Nortel is 5.73 times more volatile than ABB. It trades about 0.11 of its potential returns per unit of risk. ABB is currently generating about 0.05 per unit of risk. If you would invest 3.30 in American Nortel Communications on August 15, 2025 and sell it today you would earn a total of 1.77 from holding American Nortel Communications or generate 53.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.44% |
| Values | Daily Returns |
American Nortel Communications vs. ABB
Performance |
| Timeline |
| American Nortel Comm |
| ABB |
American Nortel and ABB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Nortel and ABB
The main advantage of trading using opposite American Nortel and ABB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Nortel 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.| American Nortel vs. Universal Media Group | American Nortel vs. Fortran Corp | American Nortel vs. Clubhouse Media Group | American Nortel vs. RAADR Inc |
| ABB vs. Rolls Royce Holdings PLC | ABB vs. Rolls Royce Holdings | ABB vs. Safran SA | ABB vs. Schneider Electric SA |
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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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