Correlation Between Aberdeen Japan and Aberdeen Asia

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

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

Diversification Opportunities for Aberdeen Japan and Aberdeen Asia

0.72

Correlation Coefficient

Aberdeen Japan  Aberdeen Asia

Poor diversification

The 3 months correlation between Aberdeen and Aberdeen is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Aberdeen Japan Equity 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 Aberdeen Japan 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 Japan Equity 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 Aberdeen Japan i.e., Aberdeen Japan and Aberdeen Asia go up and down completely randomly.

Pair Corralation between Aberdeen Japan and Aberdeen Asia

Considering the 90-day investment horizon Aberdeen Japan Equity is expected to generate 0.94 times more return on investment than Aberdeen Asia. However, Aberdeen Japan Equity is 1.07 times less risky than Aberdeen Asia. It trades about 0.1 of its potential returns per unit of risk. Aberdeen Asia Pacific If is currently generating about -0.09 per unit of risk. If you would invest  572.00  in Aberdeen Japan Equity on September 3, 2024 and sell it today you would earn a total of  11.00  from holding Aberdeen Japan Equity or generate 1.92% return on investment over 90 days.

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

Aberdeen Japan Equity  vs.  Aberdeen Asia Pacific If

Aberdeen Japan Equity

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aberdeen Japan Equity has generated negative risk-adjusted returns adding no value to fund investors. Even with relatively invariable technical and fundamental indicators, Aberdeen Japan is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail 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 Aberdeen Japan and Aberdeen Asia

The main advantage of trading using opposite Aberdeen Japan and Aberdeen Asia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aberdeen Japan 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 Aberdeen Japan Equity 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.

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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .