Correlation Between Touchstone Large and Aberdeen

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

By analyzing existing cross correlation between Touchstone Large Cap and Aberdeen Eq Long Short, you can compare the effects of market volatilities on Touchstone Large and Aberdeen 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 Touchstone Large with a short position of Aberdeen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Touchstone Large and Aberdeen.

Diversification Opportunities for Touchstone Large and Aberdeen

-0.21

Correlation Coefficient

Touchstone Large  Aberdeen

Very good diversification

The 3 months correlation between Touchstone and Aberdeen is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Touchstone Large Cap and Aberdeen Eq Long Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aberdeen Eq Long and Touchstone Large 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 Touchstone Large Cap are associated (or correlated) with Aberdeen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aberdeen Eq Long has no effect on the direction of Touchstone Large i.e., Touchstone Large and Aberdeen go up and down completely randomly.

Pair Corralation between Touchstone Large and Aberdeen

Assuming the 90 days horizon Touchstone Large is expected to generate 508.46 times less return on investment than Aberdeen. But when comparing it to its historical volatility, Touchstone Large Cap is 41.41 times less risky than Aberdeen. It trades about 0.01 of its potential returns per unit of risk. Aberdeen Eq Long Short is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  911.00  in Aberdeen Eq Long Short on December 23, 2024 and sell it today you would earn a total of  2,043  from holding Aberdeen Eq Long Short or generate 224.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	63.93%
Values	Daily Returns

Touchstone Large Cap  vs.  Aberdeen Eq Long Short

Touchstone Large Cap

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Touchstone Large Cap are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong essential indicators, Touchstone Large is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Aberdeen Eq Long

Risk-Adjusted Performance

Good

Over the last 90 days Aberdeen Eq Long Short has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly weak forward indicators, Aberdeen showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Touchstone Large and Aberdeen

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

The idea behind Touchstone Large Cap and Aberdeen Eq Long Short 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.