Correlation Between Abacus Life and Old Dominion

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

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

Diversification Opportunities for Abacus Life and Old Dominion

-0.64

Correlation Coefficient

Abacus Life  Old Dominion

Excellent diversification

The 3 months correlation between Abacus and Old is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Abacus Life and Old Dominion Freight in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Old Dominion Freight 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 Old Dominion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Old Dominion Freight has no effect on the direction of Abacus Life i.e., Abacus Life and Old Dominion go up and down completely randomly.

Pair Corralation between Abacus Life and Old Dominion

Considering the 90-day investment horizon Abacus Life is expected to generate 2.13 times more return on investment than Old Dominion. However, Abacus Life is 2.13 times more volatile than Old Dominion Freight. It trades about -0.12 of its potential returns per unit of risk. Old Dominion Freight is currently generating about -0.29 per unit of risk. If you would invest  875.00  in Abacus Life on September 14, 2024 and sell it today you would lose (86.00) from holding Abacus Life or give up 9.83% of portfolio value over 90 days.

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

Abacus Life  vs.  Old Dominion Freight

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 conflicting 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.

Old Dominion Freight

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Old Dominion Freight are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite weak technical and fundamental indicators, Old Dominion may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Abacus Life and Old Dominion

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

The idea behind Abacus Life and Old Dominion Freight 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.