Correlation Between Delek Drilling and Aegon Funding

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

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

Diversification Opportunities for Delek Drilling and Aegon Funding

0.04

Correlation Coefficient

Delek Drilling  Aegon Funding

Significant diversification

The 3 months correlation between Delek and Aegon is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Delek Drilling and Aegon Funding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aegon Funding and Delek Drilling 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 Delek Drilling are associated (or correlated) with Aegon Funding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aegon Funding has no effect on the direction of Delek Drilling i.e., Delek Drilling and Aegon Funding go up and down completely randomly.

Pair Corralation between Delek Drilling and Aegon Funding

Assuming the 90 days horizon Delek Drilling is expected to generate 1.99 times more return on investment than Aegon Funding. However, Delek Drilling is 1.99 times more volatile than Aegon Funding. It trades about 0.11 of its potential returns per unit of risk. Aegon Funding is currently generating about -0.04 per unit of risk. If you would invest  327.00  in Delek Drilling on December 20, 2024 and sell it today you would earn a total of  43.00  from holding Delek Drilling or generate 13.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Delek Drilling   vs.  Aegon Funding

Delek Drilling

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Delek Drilling are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Delek Drilling reported solid returns over the last few months and may actually be approaching a breakup point.

Aegon Funding

Risk-Adjusted Performance

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 rather sound technical and fundamental indicators, Aegon Funding is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Delek Drilling and Aegon Funding

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

The idea behind Delek Drilling and Aegon Funding 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.