Correlation Between Aggressive Investors and Aberdeen Income

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

By analyzing existing cross correlation between Aggressive Investors 1 and Aberdeen Income Credit, you can compare the effects of market volatilities on Aggressive Investors and Aberdeen Income 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 Aggressive Investors with a short position of Aberdeen Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aggressive Investors and Aberdeen Income.

Diversification Opportunities for Aggressive Investors and Aberdeen Income

0.25

Correlation Coefficient

Aggressive Investors  Aberdeen Income

Modest diversification

The 3 months correlation between Aggressive and Aberdeen is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Aggressive Investors 1 and Aberdeen Income Credit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aberdeen Income Credit and Aggressive Investors 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 Aggressive Investors 1 are associated (or correlated) with Aberdeen Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aberdeen Income Credit has no effect on the direction of Aggressive Investors i.e., Aggressive Investors and Aberdeen Income go up and down completely randomly.

Pair Corralation between Aggressive Investors and Aberdeen Income

Assuming the 90 days horizon Aggressive Investors 1 is expected to generate 0.75 times more return on investment than Aberdeen Income. However, Aggressive Investors 1 is 1.34 times less risky than Aberdeen Income. It trades about -0.05 of its potential returns per unit of risk. Aberdeen Income Credit is currently generating about -0.33 per unit of risk. If you would invest  10,106  in Aggressive Investors 1 on September 19, 2024 and sell it today you would lose (104.00) from holding Aggressive Investors 1 or give up 1.03% of portfolio value over 90 days.

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

Aggressive Investors 1  vs.  Aberdeen Income Credit

Aggressive Investors

Risk-Adjusted Performance

14 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Aggressive Investors 1 are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Aggressive Investors may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Aberdeen Income Credit

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aberdeen Income Credit has generated negative risk-adjusted returns adding no value to fund investors. Even with relatively invariable fundamental indicators, Aberdeen Income is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Aggressive Investors and Aberdeen Income

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

The idea behind Aggressive Investors 1 and Aberdeen Income Credit 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.