Correlation Between Aegon NV and EMCOR
Can any of the company-specific risk be diversified away by investing in both Aegon NV and EMCOR 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 Aegon NV and EMCOR into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aegon NV ADR and EMCOR Group, you can compare the effects of market volatilities on Aegon NV and EMCOR 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 Aegon NV with a short position of EMCOR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aegon NV and EMCOR.
Diversification Opportunities for Aegon NV and EMCOR
Poor diversification
The 3 months correlation between Aegon and EMCOR is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Aegon NV ADR and EMCOR Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EMCOR Group and Aegon NV 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 Aegon NV ADR are associated (or correlated) with EMCOR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EMCOR Group has no effect on the direction of Aegon NV i.e., Aegon NV and EMCOR go up and down completely randomly.
Pair Corralation between Aegon NV and EMCOR
Considering the 90-day investment horizon Aegon NV ADR is expected to under-perform the EMCOR. But the stock apears to be less risky and, when comparing its historical volatility, Aegon NV ADR is 1.4 times less risky than EMCOR. The stock trades about -0.01 of its potential returns per unit of risk. The EMCOR Group is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest 43,177 in EMCOR Group on August 31, 2024 and sell it today you would earn a total of 7,618 from holding EMCOR Group or generate 17.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Aegon NV ADR vs. EMCOR Group
Performance |
| Timeline |
| Aegon NV ADR |
| EMCOR Group |
Aegon NV and EMCOR Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aegon NV and EMCOR
The main advantage of trading using opposite Aegon NV and EMCOR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aegon NV position performs unexpectedly, EMCOR 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 EMCOR will offset losses from the drop in EMCOR's long position.| Aegon NV vs. American International Group | Aegon NV vs. Hartford Financial Services | Aegon NV vs. Goosehead Insurance | Aegon NV vs. Enstar Group Limited |
Check out your portfolio center.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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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