Correlation Between Sparta Capital and Aberdeen Select

Can any of the company-specific risk be diversified away by investing in both Sparta Capital and Aberdeen Select 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 Sparta Capital and Aberdeen Select into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sparta Capital and Aberdeen Select International, you can compare the effects of market volatilities on Sparta Capital and Aberdeen Select 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 Sparta Capital with a short position of Aberdeen Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sparta Capital and Aberdeen Select.

Diversification Opportunities for Sparta Capital and Aberdeen Select

0.25

Correlation Coefficient

Sparta Capital  Aberdeen Select

Modest diversification

The 3 months correlation between Sparta and Aberdeen is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Sparta Capital and Aberdeen Select International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aberdeen Select Inte and Sparta Capital 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 Sparta Capital are associated (or correlated) with Aberdeen Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aberdeen Select Inte has no effect on the direction of Sparta Capital i.e., Sparta Capital and Aberdeen Select go up and down completely randomly.

Pair Corralation between Sparta Capital and Aberdeen Select

Assuming the 90 days horizon Sparta Capital is expected to generate 29.98 times more return on investment than Aberdeen Select. However, Sparta Capital is 29.98 times more volatile than Aberdeen Select International. It trades about 0.21 of its potential returns per unit of risk. Aberdeen Select International is currently generating about 0.06 per unit of risk. If you would invest  1.21  in Sparta Capital on February 4, 2024 and sell it today you would earn a total of  1.79  from holding Sparta Capital or generate 147.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Sparta Capital  vs.  Aberdeen Select International

Sparta Capital

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sparta Capital are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Sparta Capital reported solid returns over the last few months and may actually be approaching a breakup point.

Aberdeen Select Inte

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aberdeen Select International are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Aberdeen Select may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Sparta Capital and Aberdeen Select

The main advantage of trading using opposite Sparta Capital and Aberdeen Select positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sparta Capital position performs unexpectedly, Aberdeen Select 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 Select will offset losses from the drop in Aberdeen Select's long position.

The idea behind Sparta Capital and Aberdeen Select International 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.

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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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.