Correlation Between Aberdeen Tax-free and Jhancock Short

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

By analyzing existing cross correlation between Aberdeen Tax Free Income and Jhancock Short Duration, you can compare the effects of market volatilities on Aberdeen Tax-free and Jhancock Short 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 Tax-free with a short position of Jhancock Short. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aberdeen Tax-free and Jhancock Short.

Diversification Opportunities for Aberdeen Tax-free and Jhancock Short

0.61

Correlation Coefficient

Aberdeen Tax-free  Jhancock Short

Poor diversification

The 3 months correlation between Aberdeen and Jhancock is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Aberdeen Tax Free Income and Jhancock Short Duration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jhancock Short Duration and Aberdeen Tax-free 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 Tax Free Income are associated (or correlated) with Jhancock Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jhancock Short Duration has no effect on the direction of Aberdeen Tax-free i.e., Aberdeen Tax-free and Jhancock Short go up and down completely randomly.

Pair Corralation between Aberdeen Tax-free and Jhancock Short

Assuming the 90 days horizon Aberdeen Tax Free Income is expected to under-perform the Jhancock Short. In addition to that, Aberdeen Tax-free is 1.79 times more volatile than Jhancock Short Duration. It trades about -0.02 of its total potential returns per unit of risk. Jhancock Short Duration is currently generating about 0.2 per unit of volatility. If you would invest  922.00  in Jhancock Short Duration on December 30, 2024 and sell it today you would earn a total of  15.00  from holding Jhancock Short Duration or generate 1.63% return on investment over 90 days.

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

Aberdeen Tax Free Income  vs.  Jhancock Short Duration

Aberdeen Tax Free

Risk-Adjusted Performance

Very Weak

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

Jhancock Short Duration

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Jhancock Short Duration are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Jhancock Short 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 Tax-free and Jhancock Short

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

The idea behind Aberdeen Tax Free Income and Jhancock Short Duration 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.