Correlation Between Aegon NV and Globalfoundries

Can any of the company-specific risk be diversified away by investing in both Aegon NV and Globalfoundries 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 Globalfoundries 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 Globalfoundries, you can compare the effects of market volatilities on Aegon NV and Globalfoundries 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 Globalfoundries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aegon NV and Globalfoundries.

Diversification Opportunities for Aegon NV and Globalfoundries

0.45

Correlation Coefficient

Aegon NV  Globalfoundries

Very weak diversification

The 3 months correlation between Aegon and Globalfoundries is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Aegon NV ADR and Globalfoundries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Globalfoundries 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 Globalfoundries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Globalfoundries has no effect on the direction of Aegon NV i.e., Aegon NV and Globalfoundries go up and down completely randomly.

Pair Corralation between Aegon NV and Globalfoundries

Considering the 90-day investment horizon Aegon NV is expected to generate 2.63 times less return on investment than Globalfoundries. But when comparing it to its historical volatility, Aegon NV ADR is 2.34 times less risky than Globalfoundries. It trades about 0.06 of its potential returns per unit of risk. Globalfoundries is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  3,919  in Globalfoundries on September 14, 2024 and sell it today you would earn a total of  479.00  from holding Globalfoundries or generate 12.22% return on investment over 90 days.

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

Aegon NV ADR  vs.  Globalfoundries

Aegon NV ADR

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Aegon NV ADR are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. 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.

Globalfoundries

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Globalfoundries are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent technical and fundamental indicators, Globalfoundries unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aegon NV and Globalfoundries

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

The idea behind Aegon NV ADR and Globalfoundries 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.