Correlation Between Aberdeen Small and Thornburg Investment

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

Diversification Opportunities for Aberdeen Small and Thornburg Investment

-0.84

Correlation Coefficient

Aberdeen Small  Thornburg Investment

Pay attention - limited upside

The 3 months correlation between Aberdeen and Thornburg is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding Aberdeen Small Cap and Thornburg Investment Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thornburg Investment 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 Thornburg Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thornburg Investment has no effect on the direction of Aberdeen Small i.e., Aberdeen Small and Thornburg Investment go up and down completely randomly.

Pair Corralation between Aberdeen Small and Thornburg Investment

Assuming the 90 days horizon Aberdeen Small Cap is expected to generate 1.72 times more return on investment than Thornburg Investment. However, Aberdeen Small is 1.72 times more volatile than Thornburg Investment Income. It trades about 0.14 of its potential returns per unit of risk. Thornburg Investment Income is currently generating about 0.02 per unit of risk. If you would invest  4,081  in Aberdeen Small Cap on September 17, 2024 and sell it today you would earn a total of  96.00  from holding Aberdeen Small Cap or generate 2.35% return on investment over 90 days.

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

Aberdeen Small Cap  vs.  Thornburg Investment Income

Aberdeen Small Cap

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aberdeen Small Cap are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Aberdeen Small may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Thornburg Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Thornburg Investment Income has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Thornburg Investment 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 Small and Thornburg Investment

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

The idea behind Aberdeen Small Cap and Thornburg Investment Income 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 Transaction History module to view history of all your transactions and understand their impact on performance.