Correlation Between Mercantile Investment and Aberdeen Diversified

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

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

Diversification Opportunities for Mercantile Investment and Aberdeen Diversified

0.14

Correlation Coefficient

Mercantile Investment  Aberdeen Diversified

Average diversification

The 3 months correlation between Mercantile and Aberdeen is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding The Mercantile Investment and Aberdeen Diversified Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aberdeen Diversified and Mercantile Investment 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 The Mercantile Investment are associated (or correlated) with Aberdeen Diversified. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aberdeen Diversified has no effect on the direction of Mercantile Investment i.e., Mercantile Investment and Aberdeen Diversified go up and down completely randomly.

Pair Corralation between Mercantile Investment and Aberdeen Diversified

Assuming the 90 days trading horizon Mercantile Investment is expected to generate 6.71 times less return on investment than Aberdeen Diversified. But when comparing it to its historical volatility, The Mercantile Investment is 1.13 times less risky than Aberdeen Diversified. It trades about 0.02 of its potential returns per unit of risk. Aberdeen Diversified Income is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  4,270  in Aberdeen Diversified Income on December 1, 2024 and sell it today you would earn a total of  410.00  from holding Aberdeen Diversified Income or generate 9.6% return on investment over 90 days.

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

The Mercantile Investment  vs.  Aberdeen Diversified Income

The Mercantile Investment

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in The Mercantile Investment are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Mercantile Investment is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Aberdeen Diversified

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aberdeen Diversified Income are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Aberdeen Diversified may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Mercantile Investment and Aberdeen Diversified

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

The idea behind The Mercantile Investment and Aberdeen Diversified Income 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.