Correlation Between Aberdeen Select and American Century

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

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

Diversification Opportunities for Aberdeen Select and American Century

-0.13

Correlation Coefficient

Aberdeen Select  American Century

Good diversification

The 3 months correlation between Aberdeen and American is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Aberdeen Select International and American Century Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Century Small and Aberdeen Select 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 Select International are associated (or correlated) with American Century. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Century Small has no effect on the direction of Aberdeen Select i.e., Aberdeen Select and American Century go up and down completely randomly.

Pair Corralation between Aberdeen Select and American Century

Assuming the 90 days horizon Aberdeen Select International is expected to under-perform the American Century. But the mutual fund apears to be less risky and, when comparing its historical volatility, Aberdeen Select International is 1.81 times less risky than American Century. The mutual fund trades about -0.22 of its potential returns per unit of risk. The American Century Small is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2,380  in American Century Small on October 9, 2024 and sell it today you would earn a total of  65.00  from holding American Century Small or generate 2.73% return on investment over 90 days.

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

Aberdeen Select International  vs.  American Century Small

Aberdeen Select Inte

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aberdeen Select International has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

American Century Small

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in American Century Small are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical indicators, American Century 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 Select and American Century

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

The idea behind Aberdeen Select International and American Century Small 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.