Correlation Between Aegon NV and Independence Realty

Can any of the company-specific risk be diversified away by investing in both Aegon NV and Independence Realty 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 Independence Realty 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 Independence Realty Trust, you can compare the effects of market volatilities on Aegon NV and Independence Realty 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 Independence Realty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aegon NV and Independence Realty.

Diversification Opportunities for Aegon NV and Independence Realty

0.11

Correlation Coefficient

Aegon NV  Independence Realty

Average diversification

The 3 months correlation between Aegon and Independence is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Aegon NV ADR and Independence Realty Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Independence Realty Trust 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 Independence Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Independence Realty Trust has no effect on the direction of Aegon NV i.e., Aegon NV and Independence Realty go up and down completely randomly.

Pair Corralation between Aegon NV and Independence Realty

Considering the 90-day investment horizon Aegon NV is expected to generate 1.08 times less return on investment than Independence Realty. But when comparing it to its historical volatility, Aegon NV ADR is 1.02 times less risky than Independence Realty. It trades about 0.04 of its potential returns per unit of risk. Independence Realty Trust is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,514  in Independence Realty Trust on September 26, 2024 and sell it today you would earn a total of  518.00  from holding Independence Realty Trust or generate 34.21% return on investment over 90 days.

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

Aegon NV ADR  vs.  Independence Realty Trust

Aegon NV ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aegon NV ADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Independence Realty Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Independence Realty Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Independence Realty is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Aegon NV and Independence Realty

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

The idea behind Aegon NV ADR and Independence Realty Trust 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 Global Correlations module to find global opportunities by holding instruments from different markets.