Correlation Between First Trust and Aberdeen Global

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

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

Diversification Opportunities for First Trust and Aberdeen Global

0.11

Correlation Coefficient

First Trust  Aberdeen Global

Average diversification

The 3 months correlation between First and Aberdeen is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Energy and Aberdeen Global Dynamic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aberdeen Global Dynamic and First Trust 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 First Trust Energy are associated (or correlated) with Aberdeen Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aberdeen Global Dynamic has no effect on the direction of First Trust i.e., First Trust and Aberdeen Global go up and down completely randomly.

Pair Corralation between First Trust and Aberdeen Global

Considering the 90-day investment horizon First Trust Energy is expected to generate 1.35 times more return on investment than Aberdeen Global. However, First Trust is 1.35 times more volatile than Aberdeen Global Dynamic. It trades about 0.05 of its potential returns per unit of risk. Aberdeen Global Dynamic is currently generating about 0.06 per unit of risk. If you would invest  1,436  in First Trust Energy on September 1, 2024 and sell it today you would earn a total of  128.00  from holding First Trust Energy or generate 8.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	31.05%
Values	Daily Returns

First Trust Energy  vs.  Aberdeen Global Dynamic

First Trust Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Trust Energy has generated negative risk-adjusted returns adding no value to fund investors. Despite nearly stable forward indicators, First Trust is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Aberdeen Global Dynamic

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aberdeen Global Dynamic are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of rather sound technical and fundamental indicators, Aberdeen Global is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with First Trust and Aberdeen Global

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

The idea behind First Trust Energy and Aberdeen Global Dynamic 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..