Correlation Between Aberdeen Diversified and Mercantile Investment

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Can any of the company-specific risk be diversified away by investing in both Aberdeen Diversified and Mercantile Investment 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 Diversified and Mercantile Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aberdeen Diversified Income and The Mercantile Investment, you can compare the effects of market volatilities on Aberdeen Diversified and Mercantile Investment 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 Diversified with a short position of Mercantile Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aberdeen Diversified and Mercantile Investment.

Diversification Opportunities for Aberdeen Diversified and Mercantile Investment

AberdeenMercantileDiversified AwayAberdeenMercantileDiversified Away100%
0.36
  Correlation Coefficient

Weak diversification

The 3 months correlation between Aberdeen and Mercantile is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Aberdeen Diversified Income and The Mercantile Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The Mercantile Investment and Aberdeen Diversified 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 Diversified Income are associated (or correlated) with Mercantile Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of The Mercantile Investment has no effect on the direction of Aberdeen Diversified i.e., Aberdeen Diversified and Mercantile Investment go up and down completely randomly.

Pair Corralation between Aberdeen Diversified and Mercantile Investment

Assuming the 90 days trading horizon Aberdeen Diversified Income is expected to generate 2.03 times more return on investment than Mercantile Investment. However, Aberdeen Diversified is 2.03 times more volatile than The Mercantile Investment. It trades about -0.01 of its potential returns per unit of risk. The Mercantile Investment is currently generating about -0.07 per unit of risk. If you would invest  4,450  in Aberdeen Diversified Income on September 28, 2024 and sell it today you would lose (110.00) from holding Aberdeen Diversified Income or give up 2.47% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Aberdeen Diversified Income  vs.  The Mercantile Investment

 Performance 
JavaScript chart by amCharts 3.21.15OctNovDec -6-4-20
JavaScript chart by amCharts 3.21.15ADIG MRC
       Timeline  
Aberdeen Diversified 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Aberdeen Diversified Income has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Aberdeen Diversified is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.
JavaScript chart by amCharts 3.21.15NovDecDec4141.54242.54343.54444.5
The Mercantile Investment 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days The Mercantile Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Mercantile Investment is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.
JavaScript chart by amCharts 3.21.15NovDecDec230235240

Aberdeen Diversified and Mercantile Investment Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-6.43-4.81-3.2-1.590.01.613.234.846.45 0.050.100.150.200.250.300.35
JavaScript chart by amCharts 3.21.15ADIG MRC
       Returns  

Pair Trading with Aberdeen Diversified and Mercantile Investment

The main advantage of trading using opposite Aberdeen Diversified and Mercantile Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aberdeen Diversified position performs unexpectedly, Mercantile Investment 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 Mercantile Investment will offset losses from the drop in Mercantile Investment's long position.
The idea behind Aberdeen Diversified Income and The Mercantile Investment 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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