Correlation Between Aberdeen Asia and Templeton Emerging

Can any of the company-specific risk be diversified away by investing in both Aberdeen Asia and Templeton Emerging 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 Templeton Emerging 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 Templeton Emerging Markets, you can compare the effects of market volatilities on Aberdeen Asia and Templeton Emerging 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 Templeton Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aberdeen Asia and Templeton Emerging.

Diversification Opportunities for Aberdeen Asia and Templeton Emerging

0.89

Correlation Coefficient

Aberdeen Asia  Templeton Emerging

Very poor diversification

The 3 months correlation between Aberdeen and Templeton is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Aberdeen Asia Pacific If and Templeton Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Templeton Emerging 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 Templeton Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Templeton Emerging has no effect on the direction of Aberdeen Asia i.e., Aberdeen Asia and Templeton Emerging go up and down completely randomly.

Pair Corralation between Aberdeen Asia and Templeton Emerging

Considering the 90-day investment horizon Aberdeen Asia is expected to generate 1.62 times less return on investment than Templeton Emerging. But when comparing it to its historical volatility, Aberdeen Asia Pacific If is 1.07 times less risky than Templeton Emerging. It trades about 0.02 of its potential returns per unit of risk. Templeton Emerging Markets is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  460.00  in Templeton Emerging Markets on October 21, 2024 and sell it today you would earn a total of  62.00  from holding Templeton Emerging Markets or generate 13.48% return on investment over 90 days.

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

Aberdeen Asia Pacific If  vs.  Templeton Emerging Markets

Aberdeen Asia Pacific

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aberdeen Asia Pacific If has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest fragile 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.

Templeton Emerging

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Templeton Emerging Markets has generated negative risk-adjusted returns adding no value to fund investors. Despite fairly strong technical and fundamental indicators, Templeton Emerging is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Aberdeen Asia and Templeton Emerging

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

The idea behind Aberdeen Asia Pacific If and Templeton Emerging Markets 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.