Correlation Between Aberdeen Japan and Stone Harbor

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

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

Diversification Opportunities for Aberdeen Japan and Stone Harbor

0.64

Correlation Coefficient

Aberdeen Japan  Stone Harbor

Poor diversification

The 3 months correlation between Aberdeen and Stone is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Aberdeen Japan Equity and Stone Harbor Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stone Harbor Emerging and Aberdeen Japan 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 Japan Equity are associated (or correlated) with Stone Harbor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stone Harbor Emerging has no effect on the direction of Aberdeen Japan i.e., Aberdeen Japan and Stone Harbor go up and down completely randomly.

Pair Corralation between Aberdeen Japan and Stone Harbor

Considering the 90-day investment horizon Aberdeen Japan is expected to generate 2.29 times less return on investment than Stone Harbor. But when comparing it to its historical volatility, Aberdeen Japan Equity is 1.55 times less risky than Stone Harbor. It trades about 0.04 of its potential returns per unit of risk. Stone Harbor Emerging is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  324.00  in Stone Harbor Emerging on September 3, 2024 and sell it today you would earn a total of  178.00  from holding Stone Harbor Emerging or generate 54.94% return on investment over 90 days.

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

Aberdeen Japan Equity  vs.  Stone Harbor Emerging

Aberdeen Japan Equity

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aberdeen Japan Equity has generated negative risk-adjusted returns adding no value to fund investors. Even with relatively invariable technical and fundamental indicators, Aberdeen Japan is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Stone Harbor Emerging

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stone Harbor Emerging has generated negative risk-adjusted returns adding no value to fund investors. Despite nearly stable fundamental indicators, Stone Harbor is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Aberdeen Japan and Stone Harbor

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

The idea behind Aberdeen Japan Equity and Stone Harbor Emerging 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..