Correlation Between Aegon NV and ArcelorMittal

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

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

Diversification Opportunities for Aegon NV and ArcelorMittal

0.69

Correlation Coefficient

Aegon NV  ArcelorMittal

Poor diversification

The 3 months correlation between Aegon and ArcelorMittal is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Aegon NV and ArcelorMittal SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ArcelorMittal SA 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 ArcelorMittal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ArcelorMittal SA has no effect on the direction of Aegon NV i.e., Aegon NV and ArcelorMittal go up and down completely randomly.

Pair Corralation between Aegon NV and ArcelorMittal

Assuming the 90 days trading horizon Aegon NV is expected to under-perform the ArcelorMittal. In addition to that, Aegon NV is 1.21 times more volatile than ArcelorMittal SA. It trades about -0.21 of its total potential returns per unit of risk. ArcelorMittal SA is currently generating about -0.14 per unit of volatility. If you would invest  2,411  in ArcelorMittal SA on September 19, 2024 and sell it today you would lose (120.00) from holding ArcelorMittal SA or give up 4.98% of portfolio value over 90 days.

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

Aegon NV  vs.  ArcelorMittal SA

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.

ArcelorMittal SA

Risk-Adjusted Performance

4 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ArcelorMittal SA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, ArcelorMittal may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Aegon NV and ArcelorMittal

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

The idea behind Aegon NV and ArcelorMittal SA 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.