Correlation Between Aberdeen China and Guggenheim Risk

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

By analyzing existing cross correlation between Aberdeen China Oppty and Guggenheim Risk Managed, you can compare the effects of market volatilities on Aberdeen China and Guggenheim Risk 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 China with a short position of Guggenheim Risk. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aberdeen China and Guggenheim Risk.

Diversification Opportunities for Aberdeen China and Guggenheim Risk

0.29

Correlation Coefficient

Aberdeen China  Guggenheim Risk

Modest diversification

The 3 months correlation between Aberdeen and Guggenheim is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Aberdeen China Oppty and Guggenheim Risk Managed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guggenheim Risk Managed and Aberdeen China 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 China Oppty are associated (or correlated) with Guggenheim Risk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guggenheim Risk Managed has no effect on the direction of Aberdeen China i.e., Aberdeen China and Guggenheim Risk go up and down completely randomly.

Pair Corralation between Aberdeen China and Guggenheim Risk

Assuming the 90 days horizon Aberdeen China Oppty is expected to under-perform the Guggenheim Risk. In addition to that, Aberdeen China is 1.32 times more volatile than Guggenheim Risk Managed. It trades about -0.05 of its total potential returns per unit of risk. Guggenheim Risk Managed is currently generating about 0.02 per unit of volatility. If you would invest  2,894  in Guggenheim Risk Managed on October 10, 2024 and sell it today you would earn a total of  239.00  from holding Guggenheim Risk Managed or generate 8.26% return on investment over 90 days.

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

Aberdeen China Oppty  vs.  Guggenheim Risk Managed

Aberdeen China Oppty

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aberdeen China Oppty has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Guggenheim Risk Managed

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Guggenheim Risk Managed has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak 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.

Pair Trading with Aberdeen China and Guggenheim Risk

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

The idea behind Aberdeen China Oppty and Guggenheim Risk Managed 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.