Correlation Between Abacus Life and American Financial

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

By analyzing existing cross correlation between Abacus Life and American Financial Group, you can compare the effects of market volatilities on Abacus Life and American Financial 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 American Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Abacus Life and American Financial.

Diversification Opportunities for Abacus Life and American Financial

0.66

Correlation Coefficient

Abacus Life  American Financial

Poor diversification

The 3 months correlation between Abacus and American is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Abacus Life and American Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Financial 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 American Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Financial has no effect on the direction of Abacus Life i.e., Abacus Life and American Financial go up and down completely randomly.

Pair Corralation between Abacus Life and American Financial

Considering the 90-day investment horizon Abacus Life is expected to under-perform the American Financial. In addition to that, Abacus Life is 3.66 times more volatile than American Financial Group. It trades about -0.14 of its total potential returns per unit of risk. American Financial Group is currently generating about -0.11 per unit of volatility. If you would invest  1,968  in American Financial Group on September 27, 2024 and sell it today you would lose (117.00) from holding American Financial Group or give up 5.95% of portfolio value over 90 days.

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

Abacus Life  vs.  American Financial Group

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.

American Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days American Financial Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, American Financial is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Abacus Life and American Financial

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

The idea behind Abacus Life and American Financial Group 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.