Correlation Between Aegon NV and Hydratec Industries

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

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

Diversification Opportunities for Aegon NV and Hydratec Industries

0.32

Correlation Coefficient

Aegon NV  Hydratec Industries

Weak diversification

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

Pair Corralation between Aegon NV and Hydratec Industries

Assuming the 90 days trading horizon Aegon NV is expected to generate 9.68 times less return on investment than Hydratec Industries. But when comparing it to its historical volatility, Aegon NV is 1.49 times less risky than Hydratec Industries. It trades about 0.01 of its potential returns per unit of risk. Hydratec Industries NV is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  14,700  in Hydratec Industries NV on September 20, 2024 and sell it today you would earn a total of  1,300  from holding Hydratec Industries NV or generate 8.84% 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  vs.  Hydratec Industries NV

Aegon NV

Risk-Adjusted Performance

0 of 100

Very 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.

Hydratec Industries

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hydratec Industries NV are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Hydratec Industries may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Aegon NV and Hydratec Industries

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

The idea behind Aegon NV and Hydratec Industries 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 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.