Correlation Between American Funds and Aberdeen Asia

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

By analyzing existing cross correlation between American Funds Preservation and Aberdeen Asia Pacific If, you can compare the effects of market volatilities on American Funds and Aberdeen Asia 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 American Funds with a short position of Aberdeen Asia. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Aberdeen Asia.

Diversification Opportunities for American Funds and Aberdeen Asia

0.74

Correlation Coefficient

American Funds  Aberdeen Asia

Poor diversification

The 3 months correlation between American and Aberdeen is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Preservation and Aberdeen Asia Pacific If in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aberdeen Asia Pacific and American Funds 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 American Funds Preservation are associated (or correlated) with Aberdeen Asia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aberdeen Asia Pacific has no effect on the direction of American Funds i.e., American Funds and Aberdeen Asia go up and down completely randomly.

Pair Corralation between American Funds and Aberdeen Asia

Assuming the 90 days horizon American Funds Preservation is expected to generate 0.17 times more return on investment than Aberdeen Asia. However, American Funds Preservation is 5.8 times less risky than Aberdeen Asia. It trades about -0.05 of its potential returns per unit of risk. Aberdeen Asia Pacific If is currently generating about -0.04 per unit of risk. If you would invest  947.00  in American Funds Preservation on September 4, 2024 and sell it today you would lose (4.00) from holding American Funds Preservation or give up 0.42% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

American Funds Preservation  vs.  Aberdeen Asia Pacific If

American Funds Prese

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days American Funds Preservation has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, American Funds is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Aberdeen Asia Pacific

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aberdeen Asia Pacific If has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Aberdeen Asia is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with American Funds and Aberdeen Asia

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

The idea behind American Funds Preservation and Aberdeen Asia Pacific If 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.