Correlation Between Eastern and Aegon Funding

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

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

Diversification Opportunities for Eastern and Aegon Funding

0.8

Correlation Coefficient

Eastern  Aegon Funding

Very poor diversification

The 3 months correlation between Eastern and Aegon is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Eastern Co and Aegon Funding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aegon Funding and Eastern 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 Eastern Co 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 Eastern i.e., Eastern and Aegon Funding go up and down completely randomly.

Pair Corralation between Eastern and Aegon Funding

Considering the 90-day investment horizon Eastern Co is expected to under-perform the Aegon Funding. In addition to that, Eastern is 2.58 times more volatile than Aegon Funding. It trades about -0.09 of its total potential returns per unit of risk. Aegon Funding is currently generating about -0.15 per unit of volatility. If you would invest  2,112  in Aegon Funding on September 28, 2024 and sell it today you would lose (65.00) from holding Aegon Funding or give up 3.08% of portfolio value over 90 days.

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

Eastern Co  vs.  Aegon Funding

Eastern

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eastern Co 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 primary indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Aegon Funding

Risk-Adjusted Performance

0 of 100

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 latest inconsistent performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Eastern and Aegon Funding

The main advantage of trading using opposite Eastern and Aegon Funding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eastern 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 Eastern Co 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.