Correlation Between Koninklijke KPN and Aegon NV

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

Diversification Opportunities for Koninklijke KPN and Aegon NV

-0.41

Correlation Coefficient

Koninklijke KPN  Aegon NV

Very good diversification

The 3 months correlation between Koninklijke and Aegon is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Koninklijke KPN NV and Aegon NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aegon NV and Koninklijke KPN 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 KPN NV 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 KPN i.e., Koninklijke KPN and Aegon NV go up and down completely randomly.

Pair Corralation between Koninklijke KPN and Aegon NV

Assuming the 90 days trading horizon Koninklijke KPN NV is expected to under-perform the Aegon NV. But the stock apears to be less risky and, when comparing its historical volatility, Koninklijke KPN NV is 1.51 times less risky than Aegon NV. The stock trades about -0.01 of its potential returns per unit of risk. The Aegon NV is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  536.00  in Aegon NV on August 30, 2024 and sell it today you would earn a total of  56.00  from holding Aegon NV or generate 10.45% return on investment over 90 days.

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

Koninklijke KPN NV  vs.  Aegon NV

Koninklijke KPN NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Koninklijke KPN NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Koninklijke KPN is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Aegon NV

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aegon NV are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Aegon NV may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Koninklijke KPN and Aegon NV

The main advantage of trading using opposite Koninklijke KPN and Aegon NV positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Koninklijke KPN 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 KPN NV 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.