Correlation Between Royce Micro and Aegon Funding

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

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

Diversification Opportunities for Royce Micro and Aegon Funding

-0.62

Correlation Coefficient

Royce Micro  Aegon Funding

Excellent diversification

The 3 months correlation between Royce and Aegon is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Royce Micro Cap and Aegon Funding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aegon Funding and Royce Micro 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 Royce Micro Cap 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 Royce Micro i.e., Royce Micro and Aegon Funding go up and down completely randomly.

Pair Corralation between Royce Micro and Aegon Funding

Considering the 90-day investment horizon Royce Micro Cap is expected to generate 1.48 times more return on investment than Aegon Funding. However, Royce Micro is 1.48 times more volatile than Aegon Funding. It trades about 0.09 of its potential returns per unit of risk. Aegon Funding is currently generating about -0.14 per unit of risk. If you would invest  939.00  in Royce Micro Cap on September 14, 2024 and sell it today you would earn a total of  60.00  from holding Royce Micro Cap or generate 6.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Royce Micro Cap  vs.  Aegon Funding

Royce Micro Cap

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Royce Micro Cap are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal primary indicators, Royce Micro may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 latest fragile performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Royce Micro and Aegon Funding

The main advantage of trading using opposite Royce Micro and Aegon Funding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Royce Micro 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 Royce Micro Cap 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 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.