Correlation Between Western Asset and Aberdeen Standard

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

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

Diversification Opportunities for Western Asset and Aberdeen Standard

0.55

Correlation Coefficient

Western Asset  Aberdeen Standard

Very weak diversification

The 3 months correlation between Western and Aberdeen is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Diversified and Aberdeen Standard Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aberdeen Standard Global and Western Asset 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 Western Asset Diversified are associated (or correlated) with Aberdeen Standard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aberdeen Standard Global has no effect on the direction of Western Asset i.e., Western Asset and Aberdeen Standard go up and down completely randomly.

Pair Corralation between Western Asset and Aberdeen Standard

Considering the 90-day investment horizon Western Asset is expected to generate 5.52 times less return on investment than Aberdeen Standard. But when comparing it to its historical volatility, Western Asset Diversified is 1.33 times less risky than Aberdeen Standard. It trades about 0.02 of its potential returns per unit of risk. Aberdeen Standard Global is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,961  in Aberdeen Standard Global on September 3, 2024 and sell it today you would earn a total of  25.00  from holding Aberdeen Standard Global or generate 1.27% return on investment over 90 days.

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

Western Asset Diversified  vs.  Aberdeen Standard Global

Western Asset Diversified

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Western Asset Diversified are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong fundamental indicators, Western Asset is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Aberdeen Standard Global

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Aberdeen Standard Global are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. Despite fairly strong technical and fundamental indicators, Aberdeen Standard is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Western Asset and Aberdeen Standard

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

The idea behind Western Asset Diversified and Aberdeen Standard Global 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.