Correlation Between Aberdeen Ultra and Aberdeen Small

Can any of the company-specific risk be diversified away by investing in both Aberdeen Ultra and Aberdeen Small 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 Small 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 Small Cap, you can compare the effects of market volatilities on Aberdeen Ultra and Aberdeen Small 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 Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aberdeen Ultra and Aberdeen Small.

Diversification Opportunities for Aberdeen Ultra and Aberdeen Small

-0.41

Correlation Coefficient

Aberdeen Ultra  Aberdeen Small

Very good diversification

The 3 months correlation between Aberdeen and Aberdeen is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Aberdeen Ultra Short and Aberdeen Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aberdeen Small Cap 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 Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aberdeen Small Cap has no effect on the direction of Aberdeen Ultra i.e., Aberdeen Ultra and Aberdeen Small go up and down completely randomly.

Pair Corralation between Aberdeen Ultra and Aberdeen Small

Assuming the 90 days horizon Aberdeen Ultra Short is expected to generate 0.04 times more return on investment than Aberdeen Small. However, Aberdeen Ultra Short is 22.73 times less risky than Aberdeen Small. It trades about 0.2 of its potential returns per unit of risk. Aberdeen Small Cap is currently generating about -0.07 per unit of risk. If you would invest  1,002  in Aberdeen Ultra Short on December 30, 2024 and sell it today you would earn a total of  7.00  from holding Aberdeen Ultra Short or generate 0.7% return on investment over 90 days.

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

Aberdeen Ultra Short  vs.  Aberdeen Small Cap

Aberdeen Ultra Short

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aberdeen Ultra Short are ranked lower than 15 (%) 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 Small Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Aberdeen Small Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Aberdeen Small 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 Small

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

The idea behind Aberdeen Ultra Short and Aberdeen Small Cap 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.