Correlation Between New World and Aberdeen Asia

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

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

Diversification Opportunities for New World and Aberdeen Asia

0.71

Correlation Coefficient

New World  Aberdeen Asia

Poor diversification

The 3 months correlation between New and Aberdeen is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding New World Fund 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 New World 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 New World Fund 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 New World i.e., New World and Aberdeen Asia go up and down completely randomly.

Pair Corralation between New World and Aberdeen Asia

Assuming the 90 days horizon New World Fund is expected to generate 0.85 times more return on investment than Aberdeen Asia. However, New World Fund is 1.18 times less risky than Aberdeen Asia. It trades about 0.02 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  7,850  in New World Fund on September 4, 2024 and sell it today you would earn a total of  74.00  from holding New World Fund or generate 0.94% return on investment over 90 days.

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

New World Fund  vs.  Aberdeen Asia Pacific If

New World Fund

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in New World Fund are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental drivers, New World 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 New World and Aberdeen Asia

The main advantage of trading using opposite New World and Aberdeen Asia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New World 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 New World Fund 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.