Correlation Between First Trust and Aberdeen Standard

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

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

Diversification Opportunities for First Trust and Aberdeen Standard

-0.17

Correlation Coefficient

First Trust  Aberdeen Standard

Good diversification

The 3 months correlation between First and Aberdeen is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Energy and Aberdeen Standard Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aberdeen Standard Global and First Trust 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 First Trust Energy are associated (or correlated) with Aberdeen Standard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aberdeen Standard Global has no effect on the direction of First Trust i.e., First Trust and Aberdeen Standard go up and down completely randomly.

Pair Corralation between First Trust and Aberdeen Standard

If you would invest  1,918  in Aberdeen Standard Global on August 31, 2024 and sell it today you would earn a total of  58.00  from holding Aberdeen Standard Global or generate 3.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	1.59%
Values	Daily Returns

First Trust Energy  vs.  Aberdeen Standard Global

First Trust Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Trust Energy has generated negative risk-adjusted returns adding no value to fund investors. Despite nearly stable forward indicators, First Trust is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Aberdeen Standard Global

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Aberdeen Standard Global are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. Despite fairly strong technical and fundamental indicators, Aberdeen Standard is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with First Trust and Aberdeen Standard

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

The idea behind First Trust Energy and Aberdeen Standard Global 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.