Correlation Between Aberdeen Diversified and London Security
Can any of the company-specific risk be diversified away by investing in both Aberdeen Diversified and London Security 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 Diversified and London Security into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aberdeen Diversified Income and London Security Plc, you can compare the effects of market volatilities on Aberdeen Diversified and London Security 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 Diversified with a short position of London Security. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aberdeen Diversified and London Security.
Diversification Opportunities for Aberdeen Diversified and London Security
0.16 | Correlation Coefficient |
Average diversification
The 3 months correlation between Aberdeen and London is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Aberdeen Diversified Income and London Security Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on London Security Plc and Aberdeen Diversified 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 Diversified Income are associated (or correlated) with London Security. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of London Security Plc has no effect on the direction of Aberdeen Diversified i.e., Aberdeen Diversified and London Security go up and down completely randomly.
Pair Corralation between Aberdeen Diversified and London Security
Assuming the 90 days trading horizon Aberdeen Diversified is expected to generate 2.49 times less return on investment than London Security. In addition to that, Aberdeen Diversified is 1.4 times more volatile than London Security Plc. It trades about 0.02 of its total potential returns per unit of risk. London Security Plc is currently generating about 0.06 per unit of volatility. If you would invest 294,207 in London Security Plc on August 29, 2024 and sell it today you would earn a total of 30,793 from holding London Security Plc or generate 10.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Aberdeen Diversified Income vs. London Security Plc
Performance |
| Timeline |
| Aberdeen Diversified |
| London Security Plc |
Aberdeen Diversified and London Security Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aberdeen Diversified and London Security
The main advantage of trading using opposite Aberdeen Diversified and London Security positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aberdeen Diversified position performs unexpectedly, London Security 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 London Security will offset losses from the drop in London Security's long position.The idea behind Aberdeen Diversified Income and London Security Plc 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.
| London Security vs. Aberdeen Diversified Income | London Security vs. Molson Coors Beverage | London Security vs. Fevertree Drinks Plc | London Security vs. Gamma Communications PLC |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
Other Complementary Tools
| Share Portfolio Track or share privately all of your investments from the convenience of any device | |
| Volatility Analysis Get historical volatility and risk analysis based on latest market data | |
| Global Markets Map Get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes | |
| Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios | |
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk |