Correlation Between Aegon NV and Inter Parfums

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

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

Diversification Opportunities for Aegon NV and Inter Parfums

0.38

Correlation Coefficient

Aegon NV  Inter Parfums

Weak diversification

The 3 months correlation between Aegon and Inter is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Aegon NV ADR and Inter Parfums in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inter Parfums and Aegon NV 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 NV ADR are associated (or correlated) with Inter Parfums. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inter Parfums has no effect on the direction of Aegon NV i.e., Aegon NV and Inter Parfums go up and down completely randomly.

Pair Corralation between Aegon NV and Inter Parfums

Considering the 90-day investment horizon Aegon NV is expected to generate 2.68 times less return on investment than Inter Parfums. But when comparing it to its historical volatility, Aegon NV ADR is 1.16 times less risky than Inter Parfums. It trades about 0.06 of its potential returns per unit of risk. Inter Parfums is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  11,913  in Inter Parfums on September 15, 2024 and sell it today you would earn a total of  1,771  from holding Inter Parfums or generate 14.87% return on investment over 90 days.

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

Aegon NV ADR  vs.  Inter Parfums

Aegon NV ADR

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Aegon NV ADR are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Aegon NV is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Inter Parfums

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Inter Parfums are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Inter Parfums reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aegon NV and Inter Parfums

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

The idea behind Aegon NV ADR and Inter Parfums 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.