Correlation Between Service Properties and Aegon NV

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

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

Diversification Opportunities for Service Properties and Aegon NV

0.66

Correlation Coefficient

Service Properties  Aegon NV

Poor diversification

The 3 months correlation between Service and Aegon is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Service Properties Trust and Aegon NV ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aegon NV ADR and Service Properties 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 Service Properties Trust 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 ADR has no effect on the direction of Service Properties i.e., Service Properties and Aegon NV go up and down completely randomly.

Pair Corralation between Service Properties and Aegon NV

Considering the 90-day investment horizon Service Properties Trust is expected to generate 1.6 times more return on investment than Aegon NV. However, Service Properties is 1.6 times more volatile than Aegon NV ADR. It trades about 0.05 of its potential returns per unit of risk. Aegon NV ADR is currently generating about 0.0 per unit of risk. If you would invest  278.00  in Service Properties Trust on December 1, 2024 and sell it today you would earn a total of  20.00  from holding Service Properties Trust or generate 7.19% return on investment over 90 days.

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

Service Properties Trust  vs.  Aegon NV ADR

Service Properties Trust

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Service Properties Trust are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent basic indicators, Service Properties may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Aegon NV ADR

Risk-Adjusted Performance

Very Weak

Over the last 90 days Aegon NV ADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Aegon NV is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Service Properties and Aegon NV

The main advantage of trading using opposite Service Properties and Aegon NV positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Service Properties 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 Service Properties Trust and Aegon NV ADR 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.