Correlation Between Aegon NV and Montauk Renewables

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

Diversification Opportunities for Aegon NV and Montauk Renewables

-0.24

Correlation Coefficient

Aegon NV  Montauk Renewables

Very good diversification

The 3 months correlation between Aegon and Montauk is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Aegon NV ADR and Montauk Renewables in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Montauk Renewables 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 Montauk Renewables. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Montauk Renewables has no effect on the direction of Aegon NV i.e., Aegon NV and Montauk Renewables go up and down completely randomly.

Pair Corralation between Aegon NV and Montauk Renewables

Considering the 90-day investment horizon Aegon NV ADR is expected to generate 0.34 times more return on investment than Montauk Renewables. However, Aegon NV ADR is 2.9 times less risky than Montauk Renewables. It trades about 0.12 of its potential returns per unit of risk. Montauk Renewables is currently generating about -0.14 per unit of risk. If you would invest  586.00  in Aegon NV ADR on December 28, 2024 and sell it today you would earn a total of  87.00  from holding Aegon NV ADR or generate 14.85% return on investment over 90 days.

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

Aegon NV ADR  vs.  Montauk Renewables

Aegon NV ADR

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aegon NV ADR are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Aegon NV reported solid returns over the last few months and may actually be approaching a breakup point.

Montauk Renewables

Risk-Adjusted Performance

Very Weak

Over the last 90 days Montauk Renewables has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Aegon NV and Montauk Renewables

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

The idea behind Aegon NV ADR and Montauk Renewables 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.