Correlation Between Aegon Funding and American Financial

Can any of the company-specific risk be diversified away by investing in both Aegon Funding and American Financial 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 Aegon Funding and American Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Aegon Funding and American Financial Group, you can compare the effects of market volatilities on Aegon Funding and American Financial 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 Aegon Funding with a short position of American Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aegon Funding and American Financial.

Diversification Opportunities for Aegon Funding and American Financial

0.5

Correlation Coefficient

Aegon Funding  American Financial

Very weak diversification

The 3 months correlation between Aegon and American is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Aegon Funding and American Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Financial and Aegon Funding 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 Aegon Funding are associated (or correlated) with American Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Financial has no effect on the direction of Aegon Funding i.e., Aegon Funding and American Financial go up and down completely randomly.

Pair Corralation between Aegon Funding and American Financial

Given the investment horizon of 90 days Aegon Funding is expected to under-perform the American Financial. In addition to that, Aegon Funding is 1.69 times more volatile than American Financial Group. It trades about -0.1 of its total potential returns per unit of risk. American Financial Group is currently generating about 0.04 per unit of volatility. If you would invest  2,450  in American Financial Group on August 31, 2024 and sell it today you would earn a total of  12.00  from holding American Financial Group or generate 0.49% return on investment over 90 days.

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

Aegon Funding  vs.  American Financial Group

Aegon Funding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aegon Funding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Aegon Funding is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

American Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days American Financial Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, American Financial is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Aegon Funding and American Financial

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

The idea behind Aegon Funding and American Financial Group 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.