Correlation Between Aegon NV and Galapagos

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

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

Diversification Opportunities for Aegon NV and Galapagos

-0.32

Correlation Coefficient

Aegon NV  Galapagos

Very good diversification

The 3 months correlation between Aegon and Galapagos is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Aegon NV and Galapagos NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Galapagos NV 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 are associated (or correlated) with Galapagos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Galapagos NV has no effect on the direction of Aegon NV i.e., Aegon NV and Galapagos go up and down completely randomly.

Pair Corralation between Aegon NV and Galapagos

Assuming the 90 days trading horizon Aegon NV is expected to under-perform the Galapagos. But the stock apears to be less risky and, when comparing its historical volatility, Aegon NV is 1.13 times less risky than Galapagos. The stock trades about -0.21 of its potential returns per unit of risk. The Galapagos NV is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  2,556  in Galapagos NV on September 19, 2024 and sell it today you would lose (6.00) from holding Galapagos NV or give up 0.23% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.65%
Values	Daily Returns

Aegon NV  vs.  Galapagos NV

Aegon NV

Risk-Adjusted Performance

0 of 100

Weak

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

Galapagos NV

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Aegon NV and Galapagos

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

The idea behind Aegon NV and Galapagos NV 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.