Correlation Between Aberdeen Global and IShares Asia

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

By analyzing existing cross correlation between Aberdeen Global Dynamic and iShares Asia 50, you can compare the effects of market volatilities on Aberdeen Global and IShares Asia 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 Global with a short position of IShares Asia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aberdeen Global and IShares Asia.

Diversification Opportunities for Aberdeen Global and IShares Asia

0.86

Correlation Coefficient

Aberdeen Global  IShares Asia

Very poor diversification

The 3 months correlation between Aberdeen and IShares is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Aberdeen Global Dynamic and iShares Asia 50 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Asia 50 and Aberdeen Global 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 Global Dynamic are associated (or correlated) with IShares Asia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Asia 50 has no effect on the direction of Aberdeen Global i.e., Aberdeen Global and IShares Asia go up and down completely randomly.

Pair Corralation between Aberdeen Global and IShares Asia

Considering the 90-day investment horizon Aberdeen Global is expected to generate 1.44 times less return on investment than IShares Asia. But when comparing it to its historical volatility, Aberdeen Global Dynamic is 2.91 times less risky than IShares Asia. It trades about 0.06 of its potential returns per unit of risk. iShares Asia 50 is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  6,740  in iShares Asia 50 on August 30, 2024 and sell it today you would earn a total of  165.00  from holding iShares Asia 50 or generate 2.45% return on investment over 90 days.

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

Aberdeen Global Dynamic  vs.  iShares Asia 50

Aberdeen Global Dynamic

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Aberdeen Global Dynamic are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of rather sound technical and fundamental indicators, Aberdeen Global is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

iShares Asia 50

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Asia 50 are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong forward indicators, IShares Asia 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 Global and IShares Asia

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

The idea behind Aberdeen Global Dynamic and iShares Asia 50 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.