Correlation Between Abrdn Physical and Principal Small

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

By analyzing existing cross correlation between abrdn Physical Palladium and Principal Small Cap Multi Factor, you can compare the effects of market volatilities on Abrdn Physical and Principal 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 Abrdn Physical with a short position of Principal Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Abrdn Physical and Principal Small.

Diversification Opportunities for Abrdn Physical and Principal Small

0.74

Correlation Coefficient

Abrdn Physical  Principal Small

Poor diversification

The 3 months correlation between Abrdn and Principal is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding abrdn Physical Palladium and Principal Small Cap Multi Fact in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Principal Small Cap and Abrdn Physical 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 abrdn Physical Palladium are associated (or correlated) with Principal Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Principal Small Cap has no effect on the direction of Abrdn Physical i.e., Abrdn Physical and Principal Small go up and down completely randomly.

Pair Corralation between Abrdn Physical and Principal Small

Given the investment horizon of 90 days abrdn Physical Palladium is expected to generate 1.89 times more return on investment than Principal Small. However, Abrdn Physical is 1.89 times more volatile than Principal Small Cap Multi Factor. It trades about 0.23 of its potential returns per unit of risk. Principal Small Cap Multi Factor is currently generating about 0.17 per unit of risk. If you would invest  8,582  in abrdn Physical Palladium on April 25, 2025 and sell it today you would earn a total of  2,884  from holding abrdn Physical Palladium or generate 33.61% return on investment over 90 days.

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

abrdn Physical Palladium  vs.  Principal Small Cap Multi Fact

abrdn Physical Palladium

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in abrdn Physical Palladium are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite quite weak essential indicators, Abrdn Physical disclosed solid returns over the last few months and may actually be approaching a breakup point.

Principal Small Cap

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Principal Small Cap Multi Factor are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Principal Small may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Abrdn Physical and Principal Small

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

The idea behind abrdn Physical Palladium and Principal Small Cap Multi Factor 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.