Correlation Between Payden High and Aberdeen Asia

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

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

Diversification Opportunities for Payden High and Aberdeen Asia

0.2

Correlation Coefficient

Payden High  Aberdeen Asia

Modest diversification

The 3 months correlation between Payden and Aberdeen is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Payden High Income and Aberdeen Asia Pacificome in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aberdeen Asia Pacificome and Payden High 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 Payden High Income are associated (or correlated) with Aberdeen Asia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aberdeen Asia Pacificome has no effect on the direction of Payden High i.e., Payden High and Aberdeen Asia go up and down completely randomly.

Pair Corralation between Payden High and Aberdeen Asia

Assuming the 90 days horizon Payden High is expected to generate 84.75 times less return on investment than Aberdeen Asia. But when comparing it to its historical volatility, Payden High Income is 233.03 times less risky than Aberdeen Asia. It trades about 0.21 of its potential returns per unit of risk. Aberdeen Asia Pacificome is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  289.00  in Aberdeen Asia Pacificome on September 27, 2024 and sell it today you would earn a total of  1,411  from holding Aberdeen Asia Pacificome or generate 488.24% return on investment over 90 days.

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

Payden High Income  vs.  Aberdeen Asia Pacificome

Payden High Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Payden High Income has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong essential indicators, Payden High is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Aberdeen Asia Pacificome

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aberdeen Asia Pacificome 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.

Pair Trading with Payden High and Aberdeen Asia

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

The idea behind Payden High Income and Aberdeen Asia Pacificome 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.