Correlation Between Aberdeen Small and Columbia Seligman

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

By analyzing existing cross correlation between Aberdeen Small Cap and Columbia Seligman Premium, you can compare the effects of market volatilities on Aberdeen Small and Columbia Seligman 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 Small with a short position of Columbia Seligman. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aberdeen Small and Columbia Seligman.

Diversification Opportunities for Aberdeen Small and Columbia Seligman

0.8

Correlation Coefficient

Aberdeen Small  Columbia Seligman

Very poor diversification

The 3 months correlation between Aberdeen and Columbia is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Aberdeen Small Cap and Columbia Seligman Premium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Seligman Premium and Aberdeen Small 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 Small Cap are associated (or correlated) with Columbia Seligman. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Seligman Premium has no effect on the direction of Aberdeen Small i.e., Aberdeen Small and Columbia Seligman go up and down completely randomly.

Pair Corralation between Aberdeen Small and Columbia Seligman

Assuming the 90 days horizon Aberdeen Small Cap is expected to generate 1.25 times more return on investment than Columbia Seligman. However, Aberdeen Small is 1.25 times more volatile than Columbia Seligman Premium. It trades about 0.22 of its potential returns per unit of risk. Columbia Seligman Premium is currently generating about 0.13 per unit of risk. If you would invest  2,776  in Aberdeen Small Cap on August 31, 2024 and sell it today you would earn a total of  459.00  from holding Aberdeen Small Cap or generate 16.53% return on investment over 90 days.

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

Aberdeen Small Cap  vs.  Columbia Seligman Premium

Aberdeen Small Cap

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Aberdeen Small Cap are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Aberdeen Small showed solid returns over the last few months and may actually be approaching a breakup point.

Columbia Seligman Premium

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Columbia Seligman Premium are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain basic indicators, Columbia Seligman may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Aberdeen Small and Columbia Seligman

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

The idea behind Aberdeen Small Cap and Columbia Seligman Premium 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.