Correlation Between Aberdeen Income and SP GLOBAL

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

By analyzing existing cross correlation between Aberdeen Income Credit and SP GLOBAL 1200, you can compare the effects of market volatilities on Aberdeen Income and SP GLOBAL 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 Income with a short position of SP GLOBAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aberdeen Income and SP GLOBAL.

Diversification Opportunities for Aberdeen Income and SP GLOBAL

0.75

Correlation Coefficient

Aberdeen Income  SP GLOBAL

Poor diversification

The 3 months correlation between Aberdeen and SGLY is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Aberdeen Income Credit and SP GLOBAL 1200 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SP GLOBAL 1200 and Aberdeen Income 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 Income Credit are associated (or correlated) with SP GLOBAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SP GLOBAL 1200 has no effect on the direction of Aberdeen Income i.e., Aberdeen Income and SP GLOBAL go up and down completely randomly.

Pair Corralation between Aberdeen Income and SP GLOBAL

Considering the 90-day investment horizon Aberdeen Income is expected to generate 25.71 times less return on investment than SP GLOBAL. In addition to that, Aberdeen Income is 1.47 times more volatile than SP GLOBAL 1200. It trades about 0.0 of its total potential returns per unit of risk. SP GLOBAL 1200 is currently generating about 0.15 per unit of volatility. If you would invest  397,329  in SP GLOBAL 1200 on September 12, 2024 and sell it today you would earn a total of  20,400  from holding SP GLOBAL 1200 or generate 5.13% return on investment over 90 days.

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

Aberdeen Income Credit  vs.  SP GLOBAL 1200

Pair Trading with Aberdeen Income and SP GLOBAL

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

The idea behind Aberdeen Income Credit and SP GLOBAL 1200 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.