Correlation Between Abacus Life and Globe Life

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

By analyzing existing cross correlation between Abacus Life and Globe Life 425, you can compare the effects of market volatilities on Abacus Life and Globe Life 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 Abacus Life with a short position of Globe Life. Check out your portfolio center. Please also check ongoing floating volatility patterns of Abacus Life and Globe Life.

Diversification Opportunities for Abacus Life and Globe Life

0.82

Correlation Coefficient

Abacus Life  Globe Life

Very poor diversification

The 3 months correlation between Abacus and Globe is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Abacus Life and Globe Life 425 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Globe Life 425 and Abacus Life 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 Abacus Life are associated (or correlated) with Globe Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Globe Life 425 has no effect on the direction of Abacus Life i.e., Abacus Life and Globe Life go up and down completely randomly.

Pair Corralation between Abacus Life and Globe Life

Considering the 90-day investment horizon Abacus Life is expected to generate 1.26 times less return on investment than Globe Life. In addition to that, Abacus Life is 2.25 times more volatile than Globe Life 425. It trades about 0.0 of its total potential returns per unit of risk. Globe Life 425 is currently generating about 0.01 per unit of volatility. If you would invest  1,658  in Globe Life 425 on September 19, 2024 and sell it today you would earn a total of  10.00  from holding Globe Life 425 or generate 0.6% return on investment over 90 days.

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

Abacus Life  vs.  Globe Life 425

Abacus Life

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Abacus Life has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's fundamental drivers remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Globe Life 425

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Globe Life 425 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Preferred Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Abacus Life and Globe Life

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

The idea behind Abacus Life and Globe Life 425 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 Global Correlations module to find global opportunities by holding instruments from different markets.