Correlation Between Western Asset and Aberdeen Total

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

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

Diversification Opportunities for Western Asset and Aberdeen Total

0.3

Correlation Coefficient

Western Asset  Aberdeen Total

Weak diversification

The 3 months correlation between Western and Aberdeen is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Emerging and Aberdeen Total Dynamic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aberdeen Total Dynamic and Western Asset 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 Western Asset Emerging are associated (or correlated) with Aberdeen Total. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aberdeen Total Dynamic has no effect on the direction of Western Asset i.e., Western Asset and Aberdeen Total go up and down completely randomly.

Pair Corralation between Western Asset and Aberdeen Total

Considering the 90-day investment horizon Western Asset Emerging is expected to under-perform the Aberdeen Total. But the fund apears to be less risky and, when comparing its historical volatility, Western Asset Emerging is 1.04 times less risky than Aberdeen Total. The fund trades about -0.2 of its potential returns per unit of risk. The Aberdeen Total Dynamic is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest  863.00  in Aberdeen Total Dynamic on October 5, 2024 and sell it today you would lose (18.00) from holding Aberdeen Total Dynamic or give up 2.09% of portfolio value over 90 days.

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

Western Asset Emerging  vs.  Aberdeen Total Dynamic

Western Asset Emerging

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Western Asset Emerging has generated negative risk-adjusted returns adding no value to fund investors. In spite of rather sound primary indicators, Western Asset is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Aberdeen Total Dynamic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aberdeen Total Dynamic has generated negative risk-adjusted returns adding no value to fund investors. In spite of rather sound basic indicators, Aberdeen Total is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Western Asset and Aberdeen Total

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

The idea behind Western Asset Emerging and Aberdeen Total Dynamic 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.