Correlation Between Aberdeen Emerging and Aberdeen Short

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

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

Diversification Opportunities for Aberdeen Emerging and Aberdeen Short

0.41

Correlation Coefficient

Aberdeen Emerging  Aberdeen Short

Very weak diversification

The 3 months correlation between Aberdeen and Aberdeen is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Aberdeen Emerging Markets and Aberdeen Short Duration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aberdeen Short Duration and Aberdeen Emerging 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 Emerging Markets are associated (or correlated) with Aberdeen Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aberdeen Short Duration has no effect on the direction of Aberdeen Emerging i.e., Aberdeen Emerging and Aberdeen Short go up and down completely randomly.

Pair Corralation between Aberdeen Emerging and Aberdeen Short

Assuming the 90 days horizon Aberdeen Emerging Markets is expected to generate 5.65 times more return on investment than Aberdeen Short. However, Aberdeen Emerging is 5.65 times more volatile than Aberdeen Short Duration. It trades about 0.02 of its potential returns per unit of risk. Aberdeen Short Duration is currently generating about 0.03 per unit of risk. If you would invest  1,340  in Aberdeen Emerging Markets on December 30, 2024 and sell it today you would earn a total of  10.00  from holding Aberdeen Emerging Markets or generate 0.75% return on investment over 90 days.

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

Aberdeen Emerging Markets  vs.  Aberdeen Short Duration

Aberdeen Emerging Markets

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Aberdeen Emerging Markets are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Aberdeen Emerging is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Aberdeen Short Duration

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Aberdeen Short Duration are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong primary indicators, Aberdeen Short is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Aberdeen Emerging and Aberdeen Short

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

The idea behind Aberdeen Emerging Markets and Aberdeen Short Duration 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.