Correlation Between Japan Smaller and Aberdeen Japan
Can any of the company-specific risk be diversified away by investing in both Japan Smaller and Aberdeen Japan 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 Japan Smaller and Aberdeen Japan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Japan Smaller Capitalization and Aberdeen Japan Equity, you can compare the effects of market volatilities on Japan Smaller and Aberdeen Japan 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 Japan Smaller with a short position of Aberdeen Japan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Japan Smaller and Aberdeen Japan.
Diversification Opportunities for Japan Smaller and Aberdeen Japan
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Japan and Aberdeen is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Japan Smaller Capitalization and Aberdeen Japan Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aberdeen Japan Equity and Japan Smaller 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 Japan Smaller Capitalization are associated (or correlated) with Aberdeen Japan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aberdeen Japan Equity has no effect on the direction of Japan Smaller i.e., Japan Smaller and Aberdeen Japan go up and down completely randomly.
Pair Corralation between Japan Smaller and Aberdeen Japan
Considering the 90-day investment horizon Japan Smaller Capitalization is expected to generate 0.9 times more return on investment than Aberdeen Japan. However, Japan Smaller Capitalization is 1.11 times less risky than Aberdeen Japan. It trades about 0.04 of its potential returns per unit of risk. Aberdeen Japan Equity is currently generating about -0.01 per unit of risk. If you would invest 762.00 in Japan Smaller Capitalization on August 31, 2024 and sell it today you would earn a total of 5.00 from holding Japan Smaller Capitalization or generate 0.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Japan Smaller Capitalization vs. Aberdeen Japan Equity
Performance |
| Timeline |
| Japan Smaller Capita |
| Aberdeen Japan Equity |
Japan Smaller and Aberdeen Japan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Japan Smaller and Aberdeen Japan
The main advantage of trading using opposite Japan Smaller and Aberdeen Japan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Japan Smaller position performs unexpectedly, Aberdeen Japan 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 Japan will offset losses from the drop in Aberdeen Japan's long position.| Japan Smaller vs. Mexico Closed | Japan Smaller vs. NXG NextGen Infrastructure | Japan Smaller vs. Central Europe Russia | Japan Smaller vs. Taiwan Closed |
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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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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