Correlation Between Aberdeen and Aberdeen Small

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

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

Diversification Opportunities for Aberdeen and Aberdeen Small

0.89

Correlation Coefficient

Aberdeen  Aberdeen Small

Very poor diversification

The 3 months correlation between Aberdeen and Aberdeen is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Aberdeen Equity A and Aberdeen Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aberdeen Small Cap and Aberdeen 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 Equity A are associated (or correlated) with Aberdeen Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aberdeen Small Cap has no effect on the direction of Aberdeen i.e., Aberdeen and Aberdeen Small go up and down completely randomly.

Pair Corralation between Aberdeen and Aberdeen Small

Assuming the 90 days horizon Aberdeen is expected to generate 2.24 times less return on investment than Aberdeen Small. But when comparing it to its historical volatility, Aberdeen Equity A is 1.58 times less risky than Aberdeen Small. It trades about 0.15 of its potential returns per unit of risk. Aberdeen Small Cap is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  2,379  in Aberdeen Small Cap on September 2, 2024 and sell it today you would earn a total of  396.00  from holding Aberdeen Small Cap or generate 16.65% return on investment over 90 days.

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

Aberdeen Equity A  vs.  Aberdeen Small Cap

Aberdeen Equity A

Risk-Adjusted Performance

11 of 100

Good

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

Aberdeen Small Cap

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Aberdeen Small Cap are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Aberdeen Small showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aberdeen and Aberdeen Small

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

The idea behind Aberdeen Equity A and Aberdeen Small Cap 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.