Correlation Between American Funds and Aberdeen

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

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

Diversification Opportunities for American Funds and Aberdeen

0.94

Correlation Coefficient

American Funds  Aberdeen

Almost no diversification

The 3 months correlation between American and Aberdeen is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding American Funds The and Aberdeen Equity A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aberdeen Equity A and American Funds 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 American Funds The 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 Equity A has no effect on the direction of American Funds i.e., American Funds and Aberdeen go up and down completely randomly.

Pair Corralation between American Funds and Aberdeen

Assuming the 90 days horizon American Funds The is expected to generate 1.35 times more return on investment than Aberdeen. However, American Funds is 1.35 times more volatile than Aberdeen Equity A. It trades about -0.08 of its potential returns per unit of risk. Aberdeen Equity A is currently generating about -0.13 per unit of risk. If you would invest  7,480  in American Funds The on December 30, 2024 and sell it today you would lose (508.00) from holding American Funds The or give up 6.79% of portfolio value over 90 days.

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

American Funds The  vs.  Aberdeen Equity A

American Funds

Risk-Adjusted Performance

Very Weak

Over the last 90 days American Funds The has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Aberdeen Equity A

Risk-Adjusted Performance

Very Weak

Over the last 90 days Aberdeen Equity A has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with American Funds and Aberdeen

The main advantage of trading using opposite American Funds and Aberdeen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds 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 American Funds The and Aberdeen Equity A 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.