Correlation Between Aegon NV and Transurban

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

Diversification Opportunities for Aegon NV and Transurban

-0.57

Correlation Coefficient

Aegon NV  Transurban

Excellent diversification

The 3 months correlation between Aegon and Transurban is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Aegon NV ADR and Transurban Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transurban Group 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 Transurban. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transurban Group has no effect on the direction of Aegon NV i.e., Aegon NV and Transurban go up and down completely randomly.

Pair Corralation between Aegon NV and Transurban

Considering the 90-day investment horizon Aegon NV ADR is expected to generate 0.5 times more return on investment than Transurban. However, Aegon NV ADR is 2.02 times less risky than Transurban. It trades about 0.05 of its potential returns per unit of risk. Transurban Group is currently generating about 0.01 per unit of risk. If you would invest  458.00  in Aegon NV ADR on September 14, 2024 and sell it today you would earn a total of  174.00  from holding Aegon NV ADR or generate 37.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.34%
Values	Daily Returns

Aegon NV ADR  vs.  Transurban Group

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.

Transurban Group

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Aegon NV and Transurban

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

The idea behind Aegon NV ADR and Transurban 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.