Correlation Between Aberdeen Ultra and Aberdeen Short

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

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

Diversification Opportunities for Aberdeen Ultra and Aberdeen Short

0.68

Correlation Coefficient

Aberdeen Ultra  Aberdeen Short

Poor diversification

The 3 months correlation between Aberdeen and Aberdeen is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Aberdeen Ultra Short and Aberdeen Short Duration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aberdeen Short Duration and Aberdeen Ultra 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 Ultra Short are associated (or correlated) with Aberdeen Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aberdeen Short Duration has no effect on the direction of Aberdeen Ultra i.e., Aberdeen Ultra and Aberdeen Short go up and down completely randomly.

Pair Corralation between Aberdeen Ultra and Aberdeen Short

Assuming the 90 days horizon Aberdeen Ultra Short is expected to generate 0.39 times more return on investment than Aberdeen Short. However, Aberdeen Ultra Short is 2.6 times less risky than Aberdeen Short. It trades about 0.22 of its potential returns per unit of risk. Aberdeen Short Duration is currently generating about 0.08 per unit of risk. If you would invest  944.00  in Aberdeen Ultra Short on September 2, 2024 and sell it today you would earn a total of  66.00  from holding Aberdeen Ultra Short or generate 6.99% return on investment over 90 days.

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

Aberdeen Ultra Short  vs.  Aberdeen Short Duration

Aberdeen Ultra Short

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aberdeen Ultra Short are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental drivers, Aberdeen Ultra is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Aberdeen Short Duration

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aberdeen Short Duration are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong primary indicators, Aberdeen 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 Ultra and Aberdeen Short

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

The idea behind Aberdeen Ultra Short and Aberdeen 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.