Correlation Between Aberdeen Gbl and Aberdeen Japan

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

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

Diversification Opportunities for Aberdeen Gbl and Aberdeen Japan

0.74

Correlation Coefficient

Aberdeen Gbl  Aberdeen Japan

Poor diversification

The 3 months correlation between Aberdeen and Aberdeen is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Aberdeen Gbl Eq and Aberdeen Japan Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aberdeen Japan Equity and Aberdeen Gbl 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 Gbl Eq are associated (or correlated) with Aberdeen Japan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aberdeen Japan Equity has no effect on the direction of Aberdeen Gbl i.e., Aberdeen Gbl and Aberdeen Japan go up and down completely randomly.

Pair Corralation between Aberdeen Gbl and Aberdeen Japan

Assuming the 90 days horizon Aberdeen Gbl Eq is expected to under-perform the Aberdeen Japan. But the mutual fund apears to be less risky and, when comparing its historical volatility, Aberdeen Gbl Eq is 1.39 times less risky than Aberdeen Japan. The mutual fund trades about -0.06 of its potential returns per unit of risk. The Aberdeen Japan Equity is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  597.00  in Aberdeen Japan Equity on August 31, 2024 and sell it today you would lose (14.00) from holding Aberdeen Japan Equity or give up 2.35% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Aberdeen Gbl Eq  vs.  Aberdeen Japan Equity

Aberdeen Gbl Eq

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aberdeen Gbl Eq has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Aberdeen Gbl is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Aberdeen Japan Equity

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aberdeen Japan Equity has generated negative risk-adjusted returns adding no value to fund investors. Even with relatively invariable technical and fundamental indicators, Aberdeen Japan is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Aberdeen Gbl and Aberdeen Japan

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

The idea behind Aberdeen Gbl Eq and Aberdeen Japan Equity 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.