Correlation Between Aberdeen Select and Litman Gregory

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

Diversification Opportunities for Aberdeen Select and Litman Gregory

0.9

Correlation Coefficient

Aberdeen Select  Litman Gregory

Almost no diversification

The 3 months correlation between Aberdeen and Litman is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Aberdeen Select International and Litman Gregory Masters in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Litman Gregory Masters 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 Litman Gregory. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Litman Gregory Masters has no effect on the direction of Aberdeen Select i.e., Aberdeen Select and Litman Gregory go up and down completely randomly.

Pair Corralation between Aberdeen Select and Litman Gregory

Assuming the 90 days horizon Aberdeen Select International is expected to under-perform the Litman Gregory. In addition to that, Aberdeen Select is 1.16 times more volatile than Litman Gregory Masters. It trades about -0.18 of its total potential returns per unit of risk. Litman Gregory Masters is currently generating about -0.16 per unit of volatility. If you would invest  1,855  in Litman Gregory Masters on October 8, 2024 and sell it today you would lose (133.00) from holding Litman Gregory Masters or give up 7.17% of portfolio value over 90 days.

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

Aberdeen Select International  vs.  Litman Gregory Masters

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 forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Litman Gregory Masters

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Aberdeen Select and Litman Gregory

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

The idea behind Aberdeen Select International and Litman Gregory Masters 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.