Correlation Between Ford and Aegon Funding

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

By analyzing existing cross correlation between Ford Motor and Aegon Funding, you can compare the effects of market volatilities on Ford and Aegon Funding 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 Ford with a short position of Aegon Funding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Aegon Funding.

Diversification Opportunities for Ford and Aegon Funding

0.36

Correlation Coefficient

Ford  Aegon Funding

Weak diversification

The 3 months correlation between Ford and Aegon is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Aegon Funding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aegon Funding and Ford 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 Ford Motor are associated (or correlated) with Aegon Funding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aegon Funding has no effect on the direction of Ford i.e., Ford and Aegon Funding go up and down completely randomly.

Pair Corralation between Ford and Aegon Funding

Given the investment horizon of 90 days Ford is expected to generate 2.31 times less return on investment than Aegon Funding. But when comparing it to its historical volatility, Ford Motor is 1.07 times less risky than Aegon Funding. It trades about 0.02 of its potential returns per unit of risk. Aegon Funding is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,978  in Aegon Funding on September 13, 2024 and sell it today you would earn a total of  142.00  from holding Aegon Funding or generate 7.18% return on investment over 90 days.

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

Ford Motor  vs.  Aegon Funding

Ford Motor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ford Motor has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Ford is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Aegon Funding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aegon Funding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Aegon Funding is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Ford and Aegon Funding

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

The idea behind Ford Motor and Aegon Funding 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.