Correlation Between Aberdeen Australia and Century Small

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

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

Diversification Opportunities for Aberdeen Australia and Century Small

-0.11

Correlation Coefficient

Aberdeen Australia  Century Small

Good diversification

The 3 months correlation between Aberdeen and Century is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Aberdeen Australia Equity and Century Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Century Small Cap and Aberdeen Australia 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 Aberdeen Australia Equity are associated (or correlated) with Century Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Century Small Cap has no effect on the direction of Aberdeen Australia i.e., Aberdeen Australia and Century Small go up and down completely randomly.

Pair Corralation between Aberdeen Australia and Century Small

Assuming the 90 days horizon Aberdeen Australia Equity is expected to under-perform the Century Small. But the mutual fund apears to be less risky and, when comparing its historical volatility, Aberdeen Australia Equity is 1.12 times less risky than Century Small. The mutual fund trades about -0.11 of its potential returns per unit of risk. The Century Small Cap is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  3,959  in Century Small Cap on September 27, 2024 and sell it today you would earn a total of  130.00  from holding Century Small Cap or generate 3.28% return on investment over 90 days.

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

Aberdeen Australia Equity  vs.  Century Small Cap

Aberdeen Australia Equity

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aberdeen Australia Equity has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Century Small Cap

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Century Small Cap are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Century Small is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Aberdeen Australia and Century Small

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

The idea behind Aberdeen Australia Equity and Century Small Cap 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.