Correlation Between Abrdn Short and Aberdeen Tax-free

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

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

Diversification Opportunities for Abrdn Short and Aberdeen Tax-free

0.9

Correlation Coefficient

Abrdn Short  Aberdeen Tax-free

Almost no diversification

The 3 months correlation between Abrdn and Aberdeen is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Abrdn Short Duration and Aberdeen Tax Free Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aberdeen Tax Free and Abrdn Short 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 Abrdn Short Duration are associated (or correlated) with Aberdeen Tax-free. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aberdeen Tax Free has no effect on the direction of Abrdn Short i.e., Abrdn Short and Aberdeen Tax-free go up and down completely randomly.

Pair Corralation between Abrdn Short and Aberdeen Tax-free

Assuming the 90 days horizon Abrdn Short Duration is expected to generate 0.67 times more return on investment than Aberdeen Tax-free. However, Abrdn Short Duration is 1.5 times less risky than Aberdeen Tax-free. It trades about -0.04 of its potential returns per unit of risk. Aberdeen Tax Free Income is currently generating about -0.04 per unit of risk. If you would invest  916.00  in Abrdn Short Duration on December 29, 2024 and sell it today you would lose (4.00) from holding Abrdn Short Duration or give up 0.44% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.39%
Values	Daily Returns

Abrdn Short Duration  vs.  Aberdeen Tax Free Income

Abrdn Short Duration

Risk-Adjusted Performance

Very Weak

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

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 forward 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.

Pair Trading with Abrdn Short and Aberdeen Tax-free

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

The idea behind Abrdn Short Duration and Aberdeen Tax Free 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.

Check out your portfolio center.

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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.