Correlation Between Paradigm Micro-cap and Aberdeen Small
Can any of the company-specific risk be diversified away by investing in both Paradigm Micro-cap and Aberdeen Small 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 Paradigm Micro-cap and Aberdeen Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Paradigm Micro Cap Fund and Aberdeen Small Cap, you can compare the effects of market volatilities on Paradigm Micro-cap and Aberdeen Small 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 Paradigm Micro-cap with a short position of Aberdeen Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Paradigm Micro-cap and Aberdeen Small.
Diversification Opportunities for Paradigm Micro-cap and Aberdeen Small
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Paradigm and Aberdeen is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Paradigm Micro Cap Fund and Aberdeen Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aberdeen Small Cap and Paradigm Micro-cap 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 Paradigm Micro Cap Fund are associated (or correlated) with Aberdeen Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aberdeen Small Cap has no effect on the direction of Paradigm Micro-cap i.e., Paradigm Micro-cap and Aberdeen Small go up and down completely randomly.
Pair Corralation between Paradigm Micro-cap and Aberdeen Small
Assuming the 90 days horizon Paradigm Micro-cap is expected to generate 1.77 times less return on investment than Aberdeen Small. But when comparing it to its historical volatility, Paradigm Micro Cap Fund is 1.08 times less risky than Aberdeen Small. It trades about 0.23 of its potential returns per unit of risk. Aberdeen Small Cap is currently generating about 0.38 of returns per unit of risk over similar time horizon. If you would invest 3,799 in Aberdeen Small Cap on September 1, 2024 and sell it today you would earn a total of 489.00 from holding Aberdeen Small Cap or generate 12.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Paradigm Micro Cap Fund vs. Aberdeen Small Cap
Performance |
| Timeline |
| Paradigm Micro Cap |
| Aberdeen Small Cap |
Paradigm Micro-cap and Aberdeen Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Paradigm Micro-cap and Aberdeen Small
The main advantage of trading using opposite Paradigm Micro-cap and Aberdeen Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Paradigm Micro-cap position performs unexpectedly, Aberdeen Small 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 Small will offset losses from the drop in Aberdeen Small's long position.| Paradigm Micro-cap vs. Paradigm Select Fund | Paradigm Micro-cap vs. Needham Aggressive Growth | Paradigm Micro-cap vs. Ultramid Cap Profund Ultramid Cap | Paradigm Micro-cap vs. Towle Deep Value |
| Aberdeen Small vs. Aberdeen Small Cap | Aberdeen Small vs. Aberdeen Small Cap | Aberdeen Small vs. Aberdeen Small Cap | Aberdeen Small vs. Needham Aggressive Growth |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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