Correlation Between Aberdeen Small and Towle Deep

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

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

Diversification Opportunities for Aberdeen Small and Towle Deep

0.79

Correlation Coefficient

Aberdeen Small  Towle Deep

Poor diversification

The 3 months correlation between Aberdeen and Towle is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Aberdeen Small Cap and Towle Deep Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Towle Deep Value and Aberdeen Small 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 Small Cap are associated (or correlated) with Towle Deep. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Towle Deep Value has no effect on the direction of Aberdeen Small i.e., Aberdeen Small and Towle Deep go up and down completely randomly.

Pair Corralation between Aberdeen Small and Towle Deep

Assuming the 90 days horizon Aberdeen Small is expected to generate 1.48 times less return on investment than Towle Deep. But when comparing it to its historical volatility, Aberdeen Small Cap is 1.73 times less risky than Towle Deep. It trades about 0.12 of its potential returns per unit of risk. Towle Deep Value is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,310  in Towle Deep Value on May 6, 2025 and sell it today you would earn a total of  133.00  from holding Towle Deep Value or generate 10.15% return on investment over 90 days.

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

Aberdeen Small Cap  vs.  Towle Deep Value

Aberdeen Small Cap

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aberdeen Small Cap are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Aberdeen Small may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Towle Deep Value

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Towle Deep Value are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Towle Deep may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Aberdeen Small and Towle Deep

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

The idea behind Aberdeen Small Cap and Towle Deep Value 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 Transaction History module to view history of all your transactions and understand their impact on performance.