Correlation Between Aberdeen China and Columbia Greater

Can any of the company-specific risk be diversified away by investing in both Aberdeen China and Columbia Greater 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 Columbia Greater 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 Columbia Greater China, you can compare the effects of market volatilities on Aberdeen China and Columbia Greater 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 Columbia Greater. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aberdeen China and Columbia Greater.

Diversification Opportunities for Aberdeen China and Columbia Greater

0.94

Correlation Coefficient

Aberdeen China  Columbia Greater

Almost no diversification

The 3 months correlation between Aberdeen and Columbia is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Aberdeen China Oppty and Columbia Greater China in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Greater China 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 Columbia Greater. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Greater China has no effect on the direction of Aberdeen China i.e., Aberdeen China and Columbia Greater go up and down completely randomly.

Pair Corralation between Aberdeen China and Columbia Greater

Assuming the 90 days horizon Aberdeen China is expected to generate 6.72 times less return on investment than Columbia Greater. But when comparing it to its historical volatility, Aberdeen China Oppty is 1.45 times less risky than Columbia Greater. It trades about 0.03 of its potential returns per unit of risk. Columbia Greater China is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  3,377  in Columbia Greater China on December 24, 2024 and sell it today you would earn a total of  465.00  from holding Columbia Greater China or generate 13.77% return on investment over 90 days.

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

Aberdeen China Oppty  vs.  Columbia Greater China

Aberdeen China Oppty

Risk-Adjusted Performance

Insignificant

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

Columbia Greater China

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Columbia Greater China are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Columbia Greater showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aberdeen China and Columbia Greater

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

The idea behind Aberdeen China Oppty and Columbia Greater China 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.