Correlation Between Aberdeen Asia and First Trust

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

By analyzing existing cross correlation between Aberdeen Asia Pacific If and First Trust Senior, you can compare the effects of market volatilities on Aberdeen Asia and First Trust 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 Asia with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aberdeen Asia and First Trust.

Diversification Opportunities for Aberdeen Asia and First Trust

0.53

Correlation Coefficient

Aberdeen Asia  First Trust

Very weak diversification

The 3 months correlation between Aberdeen and First is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Aberdeen Asia Pacific If and First Trust Senior in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Senior and Aberdeen Asia 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 Asia Pacific If are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Senior has no effect on the direction of Aberdeen Asia i.e., Aberdeen Asia and First Trust go up and down completely randomly.

Pair Corralation between Aberdeen Asia and First Trust

Considering the 90-day investment horizon Aberdeen Asia Pacific If is expected to generate 1.33 times more return on investment than First Trust. However, Aberdeen Asia is 1.33 times more volatile than First Trust Senior. It trades about 0.27 of its potential returns per unit of risk. First Trust Senior is currently generating about 0.0 per unit of risk. If you would invest  1,428  in Aberdeen Asia Pacific If on December 28, 2024 and sell it today you would earn a total of  136.00  from holding Aberdeen Asia Pacific If or generate 9.52% return on investment over 90 days.

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

Aberdeen Asia Pacific If  vs.  First Trust Senior

Aberdeen Asia Pacific

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Aberdeen Asia Pacific If are ranked lower than 21 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly fragile basic indicators, Aberdeen Asia may actually be approaching a critical reversion point that can send shares even higher in April 2025.

First Trust Senior

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Trust Senior has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, First Trust is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Aberdeen Asia and First Trust

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

The idea behind Aberdeen Asia Pacific If and First Trust Senior 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.