Correlation Between Aegon Funding and Lincoln Electric

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

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

Diversification Opportunities for Aegon Funding and Lincoln Electric

0.17

Correlation Coefficient

Aegon Funding  Lincoln Electric

Average diversification

The 3 months correlation between Aegon and Lincoln is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Aegon Funding and Lincoln Electric Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lincoln Electric Holdings and Aegon Funding 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 Funding are associated (or correlated) with Lincoln Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lincoln Electric Holdings has no effect on the direction of Aegon Funding i.e., Aegon Funding and Lincoln Electric go up and down completely randomly.

Pair Corralation between Aegon Funding and Lincoln Electric

Given the investment horizon of 90 days Aegon Funding is expected to generate 0.94 times more return on investment than Lincoln Electric. However, Aegon Funding is 1.06 times less risky than Lincoln Electric. It trades about -0.17 of its potential returns per unit of risk. Lincoln Electric Holdings is currently generating about -0.54 per unit of risk. If you would invest  2,120  in Aegon Funding on October 11, 2024 and sell it today you would lose (73.00) from holding Aegon Funding or give up 3.44% of portfolio value over 90 days.

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

Aegon Funding  vs.  Lincoln Electric Holdings

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 unfluctuating 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.

Lincoln Electric Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lincoln Electric Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Lincoln Electric is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Aegon Funding and Lincoln Electric

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

The idea behind Aegon Funding and Lincoln Electric Holdings 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.