Correlation Between Small Midcap and Aberdeen Equity
Can any of the company-specific risk be diversified away by investing in both Small Midcap and Aberdeen Equity 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 Small Midcap and Aberdeen Equity into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Small Midcap Dividend Income and Aberdeen Equity Instl, you can compare the effects of market volatilities on Small Midcap and Aberdeen Equity 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 Small Midcap with a short position of Aberdeen Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Midcap and Aberdeen Equity.
Diversification Opportunities for Small Midcap and Aberdeen Equity
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Small and Aberdeen is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Small Midcap Dividend Income and Aberdeen Equity Instl in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aberdeen Equity Instl and Small Midcap 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 Small Midcap Dividend Income are associated (or correlated) with Aberdeen Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aberdeen Equity Instl has no effect on the direction of Small Midcap i.e., Small Midcap and Aberdeen Equity go up and down completely randomly.
Pair Corralation between Small Midcap and Aberdeen Equity
Assuming the 90 days horizon Small Midcap Dividend Income is expected to under-perform the Aberdeen Equity. But the mutual fund apears to be less risky and, when comparing its historical volatility, Small Midcap Dividend Income is 1.12 times less risky than Aberdeen Equity. The mutual fund trades about -0.05 of its potential returns per unit of risk. The Aberdeen Equity Instl is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 1,401 in Aberdeen Equity Instl on September 12, 2024 and sell it today you would earn a total of 26.00 from holding Aberdeen Equity Instl or generate 1.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Small Midcap Dividend Income vs. Aberdeen Equity Instl
Performance |
| Timeline |
| Small Midcap Dividend |
| Aberdeen Equity Instl |
Small Midcap and Aberdeen Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Midcap and Aberdeen Equity
The main advantage of trading using opposite Small Midcap and Aberdeen Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Midcap position performs unexpectedly, Aberdeen Equity 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 Equity will offset losses from the drop in Aberdeen Equity's long position.| Small Midcap vs. Fidelity Advisor Energy | Small Midcap vs. Energy Basic Materials | Small Midcap vs. Thrivent Natural Resources | Small Midcap vs. Firsthand Alternative Energy |
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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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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