Correlation Between Aberdeen Emerging and Abrdn Em

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

By analyzing existing cross correlation between Aberdeen Emerging Markts and Abrdn Em Sma, you can compare the effects of market volatilities on Aberdeen Emerging and Abrdn Em 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 Aberdeen Emerging with a short position of Abrdn Em. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aberdeen Emerging and Abrdn Em.

Diversification Opportunities for Aberdeen Emerging and Abrdn Em

0.88

Correlation Coefficient

Aberdeen Emerging  Abrdn Em

Very poor diversification

The 3 months correlation between Aberdeen and Abrdn is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Aberdeen Emerging Markts and Abrdn Em Sma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Abrdn Em Sma and Aberdeen Emerging 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 Aberdeen Emerging Markts are associated (or correlated) with Abrdn Em. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Abrdn Em Sma has no effect on the direction of Aberdeen Emerging i.e., Aberdeen Emerging and Abrdn Em go up and down completely randomly.

Pair Corralation between Aberdeen Emerging and Abrdn Em

Assuming the 90 days horizon Aberdeen Emerging Markts is expected to generate 1.14 times more return on investment than Abrdn Em. However, Aberdeen Emerging is 1.14 times more volatile than Abrdn Em Sma. It trades about -0.03 of its potential returns per unit of risk. Abrdn Em Sma is currently generating about -0.07 per unit of risk. If you would invest  1,378  in Aberdeen Emerging Markts on December 1, 2024 and sell it today you would lose (20.00) from holding Aberdeen Emerging Markts or give up 1.45% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.36%
Values	Daily Returns

Aberdeen Emerging Markts  vs.  Abrdn Em Sma

Aberdeen Emerging Markts

Risk-Adjusted Performance

Very Weak

Over the last 90 days Aberdeen Emerging Markts has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong primary indicators, Aberdeen Emerging is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Abrdn Em Sma

Risk-Adjusted Performance

Very Weak

Over the last 90 days Abrdn Em Sma has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong primary indicators, Abrdn Em is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Aberdeen Emerging and Abrdn Em

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

The idea behind Aberdeen Emerging Markts and Abrdn Em Sma 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.