Correlation Between Aberdeen Emerging and Aberdeen Intl

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

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

Diversification Opportunities for Aberdeen Emerging and Aberdeen Intl

0.96

Correlation Coefficient

Aberdeen Emerging  Aberdeen Intl

Almost no diversification

The 3 months correlation between Aberdeen and Aberdeen is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Aberdeen Emerging Markets and Aberdeen Intl Eq in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aberdeen Intl Eq and Aberdeen Emerging 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 Emerging Markets are associated (or correlated) with Aberdeen Intl. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aberdeen Intl Eq has no effect on the direction of Aberdeen Emerging i.e., Aberdeen Emerging and Aberdeen Intl go up and down completely randomly.

Pair Corralation between Aberdeen Emerging and Aberdeen Intl

Assuming the 90 days horizon Aberdeen Emerging Markets is expected to generate 0.94 times more return on investment than Aberdeen Intl. However, Aberdeen Emerging Markets is 1.06 times less risky than Aberdeen Intl. It trades about -0.18 of its potential returns per unit of risk. Aberdeen Intl Eq is currently generating about -0.18 per unit of risk. If you would invest  1,332  in Aberdeen Emerging Markets on March 5, 2024 and sell it today you would lose (27.00) from holding Aberdeen Emerging Markets or give up 2.03% of portfolio value over 90 days.

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

Aberdeen Emerging Markets  vs.  Aberdeen Intl Eq

Aberdeen Emerging Markets

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Aberdeen Emerging Markets are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Aberdeen Emerging is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Aberdeen Intl Eq

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Aberdeen Intl Eq are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Aberdeen Intl 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 Emerging and Aberdeen Intl

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

The idea behind Aberdeen Emerging Markets and Aberdeen Intl Eq 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.