Correlation Between American Funds and Aberdeen Asia

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

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

Diversification Opportunities for American Funds and Aberdeen Asia

0.85

Correlation Coefficient

American Funds  Aberdeen Asia

Very poor diversification

The 3 months correlation between American and Aberdeen is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Retirement and Aberdeen Asia Pacific If in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aberdeen Asia Pacific and American Funds 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 American Funds Retirement 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 Pacific has no effect on the direction of American Funds i.e., American Funds and Aberdeen Asia go up and down completely randomly.

Pair Corralation between American Funds and Aberdeen Asia

Assuming the 90 days horizon American Funds is expected to generate 4.78 times less return on investment than Aberdeen Asia. But when comparing it to its historical volatility, American Funds Retirement is 1.31 times less risky than Aberdeen Asia. It trades about 0.07 of its potential returns per unit of risk. Aberdeen Asia Pacific If is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  1,428  in Aberdeen Asia Pacific If on December 30, 2024 and sell it today you would earn a total of  139.00  from holding Aberdeen Asia Pacific If or generate 9.73% return on investment over 90 days.

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

American Funds Retirement  vs.  Aberdeen Asia Pacific If

American Funds Retirement

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in American Funds Retirement are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, American Funds is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Aberdeen Asia Pacific

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Aberdeen Asia Pacific If are ranked lower than 21 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly fragile basic indicators, Aberdeen Asia may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with American Funds and Aberdeen Asia

The main advantage of trading using opposite American Funds and Aberdeen Asia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds 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 American Funds Retirement and Aberdeen Asia Pacific If 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 Stocks Directory module to find actively traded stocks across global markets.