Correlation Between Omni Small and Aberdeen

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

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

Diversification Opportunities for Omni Small and Aberdeen

0.35

Correlation Coefficient

Omni Small  Aberdeen

Weak diversification

The 3 months correlation between Omni and Aberdeen is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Omni Small Cap Value and Aberdeen Eq Long Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aberdeen Eq Long and Omni Small 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 Omni Small Cap Value are associated (or correlated) with Aberdeen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aberdeen Eq Long has no effect on the direction of Omni Small i.e., Omni Small and Aberdeen go up and down completely randomly.

Pair Corralation between Omni Small and Aberdeen

Assuming the 90 days horizon Omni Small Cap Value is expected to under-perform the Aberdeen. In addition to that, Omni Small is 1.25 times more volatile than Aberdeen Eq Long Short. It trades about -0.04 of its total potential returns per unit of risk. Aberdeen Eq Long Short is currently generating about 0.16 per unit of volatility. If you would invest  872.00  in Aberdeen Eq Long Short on October 26, 2024 and sell it today you would earn a total of  111.00  from holding Aberdeen Eq Long Short or generate 12.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

Omni Small Cap Value  vs.  Aberdeen Eq Long Short

Omni Small Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Omni Small Cap Value has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Omni Small is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Aberdeen Eq Long

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aberdeen Eq Long Short are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Aberdeen showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Omni Small and Aberdeen

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

The idea behind Omni Small Cap Value and Aberdeen Eq Long Short 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.