Correlation Between Aberdeen China and The Emerging
Can any of the company-specific risk be diversified away by investing in both Aberdeen China and The Emerging 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 China and The Emerging into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aberdeen China Oppty and The Emerging Markets, you can compare the effects of market volatilities on Aberdeen China and The Emerging 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 China with a short position of The Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aberdeen China and The Emerging.
Diversification Opportunities for Aberdeen China and The Emerging
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Aberdeen and The is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Aberdeen China Oppty and The Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerging Markets and Aberdeen China 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 China Oppty are associated (or correlated) with The Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emerging Markets has no effect on the direction of Aberdeen China i.e., Aberdeen China and The Emerging go up and down completely randomly.
Pair Corralation between Aberdeen China and The Emerging
Assuming the 90 days horizon Aberdeen China Oppty is expected to generate 2.23 times more return on investment than The Emerging. However, Aberdeen China is 2.23 times more volatile than The Emerging Markets. It trades about -0.08 of its potential returns per unit of risk. The Emerging Markets is currently generating about -0.2 per unit of risk. If you would invest 2,114 in Aberdeen China Oppty on September 4, 2024 and sell it today you would lose (77.00) from holding Aberdeen China Oppty or give up 3.64% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Aberdeen China Oppty vs. The Emerging Markets
Performance |
| Timeline |
| Aberdeen China Oppty |
| Emerging Markets |
Aberdeen China and The Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aberdeen China and The Emerging
The main advantage of trading using opposite Aberdeen China and The Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aberdeen China position performs unexpectedly, The Emerging 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 The Emerging will offset losses from the drop in The Emerging's long position.| Aberdeen China vs. Legg Mason Partners | Aberdeen China vs. Transamerica Emerging Markets | Aberdeen China vs. Barings Emerging Markets | Aberdeen China vs. Templeton Emerging Markets |
| The Emerging vs. Vanguard Total Stock | The Emerging vs. Vanguard 500 Index | The Emerging vs. Vanguard Total Stock | The Emerging vs. Vanguard Total Stock |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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