Correlation Between Aegon NV and Warner Music
Can any of the company-specific risk be diversified away by investing in both Aegon NV and Warner Music 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 Warner Music 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 Warner Music Group, you can compare the effects of market volatilities on Aegon NV and Warner Music 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 Warner Music. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aegon NV and Warner Music.
Diversification Opportunities for Aegon NV and Warner Music
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Aegon and Warner is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Aegon NV ADR and Warner Music Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Warner Music 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 Warner Music. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Warner Music Group has no effect on the direction of Aegon NV i.e., Aegon NV and Warner Music go up and down completely randomly.
Pair Corralation between Aegon NV and Warner Music
Considering the 90-day investment horizon Aegon NV ADR is expected to generate 0.99 times more return on investment than Warner Music. However, Aegon NV ADR is 1.01 times less risky than Warner Music. It trades about 0.04 of its potential returns per unit of risk. Warner Music Group is currently generating about 0.04 per unit of risk. If you would invest 611.00 in Aegon NV ADR on September 1, 2024 and sell it today you would earn a total of 38.00 from holding Aegon NV ADR or generate 6.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Aegon NV ADR vs. Warner Music Group
Performance |
| Timeline |
| Aegon NV ADR |
| Warner Music Group |
Aegon NV and Warner Music Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aegon NV and Warner Music
The main advantage of trading using opposite Aegon NV and Warner Music positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aegon NV position performs unexpectedly, Warner Music 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 Warner Music will offset losses from the drop in Warner Music's long position.| Aegon NV vs. Hartford Financial Services | Aegon NV vs. Goosehead Insurance | Aegon NV vs. International General Insurance | Aegon NV vs. Enstar Group Limited |
| Warner Music vs. ADTRAN Inc | Warner Music vs. Belden Inc | Warner Music vs. ADC Therapeutics SA | Warner Music vs. Comtech Telecommunications Corp |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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