Correlation Between Vanguard Star and Aberdeen

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

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

Diversification Opportunities for Vanguard Star and Aberdeen

0.39

Correlation Coefficient

Vanguard Star  Aberdeen

Weak diversification

The 3 months correlation between Vanguard and Aberdeen is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Star Fund 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 Vanguard Star 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 Vanguard Star Fund 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 Vanguard Star i.e., Vanguard Star and Aberdeen go up and down completely randomly.

Pair Corralation between Vanguard Star and Aberdeen

Assuming the 90 days horizon Vanguard Star Fund is expected to under-perform the Aberdeen. But the mutual fund apears to be less risky and, when comparing its historical volatility, Vanguard Star Fund is 34.8 times less risky than Aberdeen. The mutual fund trades about -0.09 of its potential returns per unit of risk. The Aberdeen Eq Long Short is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  967.00  in Aberdeen Eq Long Short on December 2, 2024 and sell it today you would earn a total of  1,987  from holding Aberdeen Eq Long Short or generate 205.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	88.52%
Values	Daily Returns

Vanguard Star Fund  vs.  Aberdeen Eq Long Short

Vanguard Star

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Star Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Vanguard Star 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

OK

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 Vanguard Star and Aberdeen

The main advantage of trading using opposite Vanguard Star and Aberdeen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Star 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 Vanguard Star Fund 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.