Correlation Between Aberdeen Diversified and DS Smith

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

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

Diversification Opportunities for Aberdeen Diversified and DS Smith

0.14

Correlation Coefficient

Aberdeen Diversified  DS Smith

Average diversification

The 3 months correlation between Aberdeen and SMDS is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Aberdeen Diversified Income and DS Smith PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DS Smith PLC and Aberdeen Diversified 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 Diversified Income are associated (or correlated) with DS Smith. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DS Smith PLC has no effect on the direction of Aberdeen Diversified i.e., Aberdeen Diversified and DS Smith go up and down completely randomly.

Pair Corralation between Aberdeen Diversified and DS Smith

Assuming the 90 days trading horizon Aberdeen Diversified Income is expected to generate 1.03 times more return on investment than DS Smith. However, Aberdeen Diversified is 1.03 times more volatile than DS Smith PLC. It trades about 0.1 of its potential returns per unit of risk. DS Smith PLC is currently generating about 0.05 per unit of risk. If you would invest  4,370  in Aberdeen Diversified Income on December 4, 2024 and sell it today you would earn a total of  330.00  from holding Aberdeen Diversified Income or generate 7.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	68.85%
Values	Daily Returns

Aberdeen Diversified Income  vs.  DS Smith PLC

Aberdeen Diversified

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aberdeen Diversified Income are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Aberdeen Diversified may actually be approaching a critical reversion point that can send shares even higher in April 2025.

DS Smith PLC

Risk-Adjusted Performance

Insignificant

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

Pair Trading with Aberdeen Diversified and DS Smith

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

The idea behind Aberdeen Diversified Income and DS Smith PLC 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.