Correlation Between Aegon NV and Empire State

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

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

Diversification Opportunities for Aegon NV and Empire State

0.46

Correlation Coefficient

Aegon NV  Empire State

Very weak diversification

The 3 months correlation between Aegon and Empire is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Aegon NV ADR and Empire State Realty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Empire State Realty 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 ADR are associated (or correlated) with Empire State. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Empire State Realty has no effect on the direction of Aegon NV i.e., Aegon NV and Empire State go up and down completely randomly.

Pair Corralation between Aegon NV and Empire State

Considering the 90-day investment horizon Aegon NV is expected to generate 91.24 times less return on investment than Empire State. But when comparing it to its historical volatility, Aegon NV ADR is 45.43 times less risky than Empire State. It trades about 0.03 of its potential returns per unit of risk. Empire State Realty is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  986.00  in Empire State Realty on October 7, 2024 and sell it today you would earn a total of  31.00  from holding Empire State Realty or generate 3.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	92.95%
Values	Daily Returns

Aegon NV ADR  vs.  Empire State Realty

Aegon NV ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aegon NV ADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Aegon NV is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Empire State Realty

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Aegon NV and Empire State

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

The idea behind Aegon NV ADR and Empire State Realty 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.

Check out your portfolio center.

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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.