Correlation Between Unum and Abacus Life

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

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

Diversification Opportunities for Unum and Abacus Life

0.42

Correlation Coefficient

Unum  Abacus Life

Very weak diversification

The 3 months correlation between Unum and Abacus is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Unum Group and Abacus Life in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Abacus Life and Unum 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 Unum Group 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 Unum i.e., Unum and Abacus Life go up and down completely randomly.

Pair Corralation between Unum and Abacus Life

Given the investment horizon of 90 days Unum Group is expected to generate 0.17 times more return on investment than Abacus Life. However, Unum Group is 5.98 times less risky than Abacus Life. It trades about -0.07 of its potential returns per unit of risk. Abacus Life is currently generating about -0.14 per unit of risk. If you would invest  2,510  in Unum Group on September 27, 2024 and sell it today you would lose (56.00) from holding Unum Group or give up 2.23% of portfolio value over 90 days.

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

Unum Group  vs.  Abacus Life

Unum Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Unum Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong primary indicators, Unum is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

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.

Pair Trading with Unum and Abacus Life

The main advantage of trading using opposite Unum and Abacus Life positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Unum 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 Unum Group 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.