Correlation Between United States and Aberdeen Diversified

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

By analyzing existing cross correlation between United States Steel and Aberdeen Diversified Income, you can compare the effects of market volatilities on United States and Aberdeen Diversified 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 United States with a short position of Aberdeen Diversified. Check out your portfolio center. Please also check ongoing floating volatility patterns of United States and Aberdeen Diversified.

Diversification Opportunities for United States and Aberdeen Diversified

0.04

Correlation Coefficient

United States  Aberdeen Diversified

Significant diversification

The 3 months correlation between United and Aberdeen is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding United States Steel and Aberdeen Diversified Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aberdeen Diversified and United States 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 United States Steel are associated (or correlated) with Aberdeen Diversified. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aberdeen Diversified has no effect on the direction of United States i.e., United States and Aberdeen Diversified go up and down completely randomly.

Pair Corralation between United States and Aberdeen Diversified

Assuming the 90 days trading horizon United States Steel is expected to generate 2.2 times more return on investment than Aberdeen Diversified. However, United States is 2.2 times more volatile than Aberdeen Diversified Income. It trades about 0.05 of its potential returns per unit of risk. Aberdeen Diversified Income is currently generating about 0.01 per unit of risk. If you would invest  3,776  in United States Steel on September 2, 2024 and sell it today you would earn a total of  283.00  from holding United States Steel or generate 7.49% return on investment over 90 days.

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

United States Steel  vs.  Aberdeen Diversified Income

United States Steel

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in United States Steel are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, United States unveiled solid returns over the last few months and may actually be approaching a breakup point.

Aberdeen Diversified

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aberdeen Diversified Income has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Aberdeen Diversified is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with United States and Aberdeen Diversified

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

The idea behind United States Steel and Aberdeen Diversified Income 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.