Correlation Between Calvert Small and Aberdeen Small

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

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

Diversification Opportunities for Calvert Small and Aberdeen Small

0.96

Correlation Coefficient

Calvert Small  Aberdeen Small

Almost no diversification

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

Pair Corralation between Calvert Small and Aberdeen Small

Assuming the 90 days horizon Calvert Small is expected to generate 1.05 times less return on investment than Aberdeen Small. But when comparing it to its historical volatility, Calvert Small Cap is 1.16 times less risky than Aberdeen Small. It trades about 0.05 of its potential returns per unit of risk. Aberdeen Small Cap is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  3,112  in Aberdeen Small Cap on September 20, 2024 and sell it today you would earn a total of  892.00  from holding Aberdeen Small Cap or generate 28.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	99.8%
Values	Daily Returns

Calvert Small Cap  vs.  Aberdeen Small Cap

Calvert Small Cap

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Calvert Small Cap are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Calvert Small is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Aberdeen Small Cap

Risk-Adjusted Performance

5 of 100

Modest

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

Pair Trading with Calvert Small and Aberdeen Small

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

The idea behind Calvert Small Cap and Aberdeen Small Cap 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.

Check out your portfolio center.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.