Correlation Between Aberdeen and Aberdeen Emerging

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

By analyzing existing cross correlation between Aberdeen Equity Instl and Aberdeen Emerging Markets, you can compare the effects of market volatilities on Aberdeen and Aberdeen Emerging 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 Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aberdeen and Aberdeen Emerging.

Diversification Opportunities for Aberdeen and Aberdeen Emerging

0.27

Correlation Coefficient

Aberdeen  Aberdeen Emerging

Modest diversification

The 3 months correlation between Aberdeen and Aberdeen is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Aberdeen Equity Instl and Aberdeen Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aberdeen Emerging Markets 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 Instl are associated (or correlated) with Aberdeen Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aberdeen Emerging Markets has no effect on the direction of Aberdeen i.e., Aberdeen and Aberdeen Emerging go up and down completely randomly.

Pair Corralation between Aberdeen and Aberdeen Emerging

Assuming the 90 days horizon Aberdeen Equity Instl is expected to under-perform the Aberdeen Emerging. In addition to that, Aberdeen is 1.02 times more volatile than Aberdeen Emerging Markets. It trades about -0.09 of its total potential returns per unit of risk. Aberdeen Emerging Markets is currently generating about -0.03 per unit of volatility. If you would invest  1,369  in Aberdeen Emerging Markets on December 1, 2024 and sell it today you would lose (22.00) from holding Aberdeen Emerging Markets or give up 1.61% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Aberdeen Equity Instl  vs.  Aberdeen Emerging Markets

Aberdeen Equity Instl

Risk-Adjusted Performance

Very Weak

Over the last 90 days Aberdeen Equity Instl has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Aberdeen is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Aberdeen Emerging Markets

Risk-Adjusted Performance

Very Weak

Over the last 90 days Aberdeen Emerging Markets has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Aberdeen Emerging 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 and Aberdeen Emerging

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

The idea behind Aberdeen Equity Instl and Aberdeen Emerging Markets 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.