Correlation Between Pace Large and Aberdeen China

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

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

Diversification Opportunities for Pace Large and Aberdeen China

0.41

Correlation Coefficient

Pace Large  Aberdeen China

Very weak diversification

The 3 months correlation between Pace and Aberdeen is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Pace Large Value and Aberdeen China Oppty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aberdeen China Oppty and Pace Large 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 Pace Large Value are associated (or correlated) with Aberdeen China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aberdeen China Oppty has no effect on the direction of Pace Large i.e., Pace Large and Aberdeen China go up and down completely randomly.

Pair Corralation between Pace Large and Aberdeen China

Assuming the 90 days horizon Pace Large is expected to generate 3.5 times less return on investment than Aberdeen China. But when comparing it to its historical volatility, Pace Large Value is 3.73 times less risky than Aberdeen China. It trades about 0.15 of its potential returns per unit of risk. Aberdeen China Oppty is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,885  in Aberdeen China Oppty on September 12, 2024 and sell it today you would earn a total of  400.00  from holding Aberdeen China Oppty or generate 21.22% return on investment over 90 days.

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

Pace Large Value  vs.  Aberdeen China Oppty

Pace Large Value

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pace Large Value are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Pace Large is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Aberdeen China Oppty

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aberdeen China Oppty are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Aberdeen China showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pace Large and Aberdeen China

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

The idea behind Pace Large Value and Aberdeen China Oppty 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..