Correlation Between NYSE Composite and Abacus Life

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

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

Diversification Opportunities for NYSE Composite and Abacus Life

0.23

Correlation Coefficient

NYSE Composite  Abacus Life

Modest diversification

The 3 months correlation between NYSE and Abacus is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Abacus Life in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Abacus Life and NYSE Composite 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 NYSE Composite are associated (or correlated) with Abacus Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Abacus Life has no effect on the direction of NYSE Composite i.e., NYSE Composite and Abacus Life go up and down completely randomly.

Pair Corralation between NYSE Composite and Abacus Life

Assuming the 90 days trading horizon NYSE Composite is expected to under-perform the Abacus Life. But the index apears to be less risky and, when comparing its historical volatility, NYSE Composite is 9.58 times less risky than Abacus Life. The index trades about -0.04 of its potential returns per unit of risk. The Abacus Life is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  122.00  in Abacus Life on November 28, 2024 and sell it today you would earn a total of  18.00  from holding Abacus Life or generate 14.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.31%
Values	Daily Returns

NYSE Composite  vs.  Abacus Life

Pair Trading with NYSE Composite and Abacus Life

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

The idea behind NYSE Composite and Abacus Life 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.