Correlation Between Aberdeen Multi and Aberdeen Equity

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

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

Diversification Opportunities for Aberdeen Multi and Aberdeen Equity

1.0

Correlation Coefficient

Aberdeen Multi  Aberdeen Equity

No risk reduction

The 3 months correlation between Aberdeen and Aberdeen is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Aberdeen Multi Cap Equity and Aberdeen Equity A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aberdeen Equity A and Aberdeen Multi 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 Multi Cap Equity are associated (or correlated) with Aberdeen Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aberdeen Equity A has no effect on the direction of Aberdeen Multi i.e., Aberdeen Multi and Aberdeen Equity go up and down completely randomly.

Pair Corralation between Aberdeen Multi and Aberdeen Equity

Assuming the 90 days horizon Aberdeen Multi Cap Equity is expected to under-perform the Aberdeen Equity. But the mutual fund apears to be less risky and, when comparing its historical volatility, Aberdeen Multi Cap Equity is 1.0 times less risky than Aberdeen Equity. The mutual fund trades about 0.0 of its potential returns per unit of risk. The Aberdeen Equity A is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  1,187  in Aberdeen Equity A on July 5, 2024 and sell it today you would lose (5.00) from holding Aberdeen Equity A or give up 0.42% of portfolio value over 90 days.

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

Aberdeen Multi Cap Equity  vs.  Aberdeen Equity A

Aberdeen Multi Cap

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Aberdeen Multi Cap Equity has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Aberdeen Multi is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Aberdeen Equity A

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aberdeen Equity A has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Aberdeen Equity 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 Multi and Aberdeen Equity

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

The idea behind Aberdeen Multi Cap Equity and Aberdeen Equity A 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.