Correlation Between Aberforth Smaller and MG Credit

Can any of the company-specific risk be diversified away by investing in both Aberforth Smaller and MG Credit 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 Aberforth Smaller and MG Credit into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Aberforth Smaller Companies and MG Credit Income, you can compare the effects of market volatilities on Aberforth Smaller and MG Credit 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 Aberforth Smaller with a short position of MG Credit. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aberforth Smaller and MG Credit.

Diversification Opportunities for Aberforth Smaller and MG Credit

-0.58

Correlation Coefficient

Aberforth Smaller  MG Credit

Excellent diversification

The 3 months correlation between Aberforth and MGCI is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Aberforth Smaller Companies and MG Credit Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MG Credit Income and Aberforth Smaller 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 Aberforth Smaller Companies are associated (or correlated) with MG Credit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MG Credit Income has no effect on the direction of Aberforth Smaller i.e., Aberforth Smaller and MG Credit go up and down completely randomly.

Pair Corralation between Aberforth Smaller and MG Credit

Assuming the 90 days trading horizon Aberforth Smaller Companies is expected to under-perform the MG Credit. But the stock apears to be less risky and, when comparing its historical volatility, Aberforth Smaller Companies is 1.07 times less risky than MG Credit. The stock trades about -0.28 of its potential returns per unit of risk. The MG Credit Income is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  9,680  in MG Credit Income on October 10, 2024 and sell it today you would lose (80.00) from holding MG Credit Income or give up 0.83% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Aberforth Smaller Companies  vs.  MG Credit Income

Aberforth Smaller

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aberforth Smaller Companies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Aberforth Smaller is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

MG Credit Income

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in MG Credit Income are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, MG Credit 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 Aberforth Smaller and MG Credit

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

The idea behind Aberforth Smaller Companies and MG Credit 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.

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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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.