Correlation Between Fair Oaks and Aberdeen Diversified

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

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

Diversification Opportunities for Fair Oaks and Aberdeen Diversified

-0.01

Correlation Coefficient

Fair Oaks  Aberdeen Diversified

Good diversification

The 3 months correlation between Fair and Aberdeen is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Fair Oaks Income and Aberdeen Diversified Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aberdeen Diversified and Fair Oaks 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 Fair Oaks Income are associated (or correlated) with Aberdeen Diversified. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aberdeen Diversified has no effect on the direction of Fair Oaks i.e., Fair Oaks and Aberdeen Diversified go up and down completely randomly.

Pair Corralation between Fair Oaks and Aberdeen Diversified

Assuming the 90 days trading horizon Fair Oaks is expected to generate 6.4 times less return on investment than Aberdeen Diversified. In addition to that, Fair Oaks is 1.83 times more volatile than Aberdeen Diversified Income. It trades about 0.01 of its total potential returns per unit of risk. Aberdeen Diversified Income is currently generating about 0.12 per unit of volatility. If you would invest  4,200  in Aberdeen Diversified Income on September 23, 2024 and sell it today you would earn a total of  120.00  from holding Aberdeen Diversified Income or generate 2.86% return on investment over 90 days.

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

Fair Oaks Income  vs.  Aberdeen Diversified Income

Fair Oaks Income

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fair Oaks Income are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Fair Oaks is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Aberdeen Diversified

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Aberdeen Diversified Income are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Pair Trading with Fair Oaks and Aberdeen Diversified

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

The idea behind Fair Oaks Income and Aberdeen Diversified Income 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.