Correlation Between T Rowe and Aberdeen

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

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

Diversification Opportunities for T Rowe and Aberdeen

-0.68

Correlation Coefficient

T Rowe  Aberdeen

Excellent diversification

The 3 months correlation between TRBCX and Aberdeen is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding T Rowe Price 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 T Rowe 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 T Rowe Price 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 T Rowe i.e., T Rowe and Aberdeen go up and down completely randomly.

Pair Corralation between T Rowe and Aberdeen

Assuming the 90 days horizon T Rowe Price is expected to under-perform the Aberdeen. But the mutual fund apears to be less risky and, when comparing its historical volatility, T Rowe Price is 22.41 times less risky than Aberdeen. The mutual fund trades about -0.11 of its potential returns per unit of risk. The 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	Weak
Accuracy	63.93%
Values	Daily Returns

T Rowe Price  vs.  Aberdeen Eq Long Short

T Rowe Price

Risk-Adjusted Performance

Very Weak

Over the last 90 days T Rowe Price has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund 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 T Rowe and Aberdeen

The main advantage of trading using opposite T Rowe and Aberdeen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if T Rowe 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 T Rowe Price 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.