Correlation Between Japan Smaller and Aberdeen Income

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

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

Diversification Opportunities for Japan Smaller and Aberdeen Income

-0.3

Correlation Coefficient

Japan Smaller  Aberdeen Income

Very good diversification

The 3 months correlation between Japan and Aberdeen is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Japan Smaller Capitalization and Aberdeen Income Credit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aberdeen Income Credit and Japan Smaller 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 Japan Smaller Capitalization are associated (or correlated) with Aberdeen Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aberdeen Income Credit has no effect on the direction of Japan Smaller i.e., Japan Smaller and Aberdeen Income go up and down completely randomly.

Pair Corralation between Japan Smaller and Aberdeen Income

Considering the 90-day investment horizon Japan Smaller Capitalization is expected to generate 0.74 times more return on investment than Aberdeen Income. However, Japan Smaller Capitalization is 1.34 times less risky than Aberdeen Income. It trades about 0.2 of its potential returns per unit of risk. Aberdeen Income Credit is currently generating about -0.33 per unit of risk. If you would invest  759.00  in Japan Smaller Capitalization on September 19, 2024 and sell it today you would earn a total of  27.00  from holding Japan Smaller Capitalization or generate 3.56% return on investment over 90 days.

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

Japan Smaller Capitalization  vs.  Aberdeen Income Credit

Japan Smaller Capita

Risk-Adjusted Performance

0 of 100

Very Weak

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

Aberdeen Income Credit

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Japan Smaller and Aberdeen Income

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

The idea behind Japan Smaller Capitalization and Aberdeen Income Credit 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.

Check out your portfolio center.

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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.