Correlation Between Balanced Strategy and Aberdeen Japan

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

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

Diversification Opportunities for Balanced Strategy and Aberdeen Japan

0.51

Correlation Coefficient

Balanced Strategy  Aberdeen Japan

Very weak diversification

The 3 months correlation between Balanced and Aberdeen is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Balanced Strategy Fund and Aberdeen Japan Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aberdeen Japan Equity and Balanced Strategy 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 Balanced Strategy Fund are associated (or correlated) with Aberdeen Japan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aberdeen Japan Equity has no effect on the direction of Balanced Strategy i.e., Balanced Strategy and Aberdeen Japan go up and down completely randomly.

Pair Corralation between Balanced Strategy and Aberdeen Japan

Assuming the 90 days horizon Balanced Strategy Fund is expected to under-perform the Aberdeen Japan. But the mutual fund apears to be less risky and, when comparing its historical volatility, Balanced Strategy Fund is 1.2 times less risky than Aberdeen Japan. The mutual fund trades about -0.24 of its potential returns per unit of risk. The Aberdeen Japan Equity is currently generating about -0.16 of returns per unit of risk over similar time horizon. If you would invest  593.00  in Aberdeen Japan Equity on October 12, 2024 and sell it today you would lose (14.00) from holding Aberdeen Japan Equity or give up 2.36% of portfolio value over 90 days.

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

Balanced Strategy Fund  vs.  Aberdeen Japan Equity

Balanced Strategy

Risk-Adjusted Performance

0 of 100

Very Weak

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

Aberdeen Japan Equity

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Balanced Strategy and Aberdeen Japan

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

The idea behind Balanced Strategy Fund and Aberdeen Japan Equity 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.