Correlation Between Koninklijke BAM and Aegon NV

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

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

Diversification Opportunities for Koninklijke BAM and Aegon NV

-0.27

Correlation Coefficient

Koninklijke BAM  Aegon NV

Very good diversification

The 3 months correlation between Koninklijke and Aegon is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Koninklijke BAM Groep and Aegon NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aegon NV and Koninklijke BAM 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 Koninklijke BAM Groep are associated (or correlated) with Aegon NV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aegon NV has no effect on the direction of Koninklijke BAM i.e., Koninklijke BAM and Aegon NV go up and down completely randomly.

Pair Corralation between Koninklijke BAM and Aegon NV

Assuming the 90 days trading horizon Koninklijke BAM Groep is expected to generate 1.46 times more return on investment than Aegon NV. However, Koninklijke BAM is 1.46 times more volatile than Aegon NV. It trades about 0.08 of its potential returns per unit of risk. Aegon NV is currently generating about 0.05 per unit of risk. If you would invest  212.00  in Koninklijke BAM Groep on October 12, 2024 and sell it today you would earn a total of  215.00  from holding Koninklijke BAM Groep or generate 101.42% return on investment over 90 days.

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

Koninklijke BAM Groep  vs.  Aegon NV

Koninklijke BAM Groep

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Koninklijke BAM Groep has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Koninklijke BAM is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Aegon NV

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Aegon NV are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Aegon NV is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Koninklijke BAM and Aegon NV

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

The idea behind Koninklijke BAM Groep and Aegon NV 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.