Correlation Between Eni SPA and Aegon Funding

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Can any of the company-specific risk be diversified away by investing in both Eni SPA 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 Eni SPA and Aegon Funding into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eni SpA ADR and Aegon Funding, you can compare the effects of market volatilities on Eni SPA 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 Eni SPA with a short position of Aegon Funding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eni SPA and Aegon Funding.

Diversification Opportunities for Eni SPA and Aegon Funding

0.63
  Correlation Coefficient

Poor diversification

The 3 months correlation between Eni and Aegon is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Eni SpA ADR and Aegon Funding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aegon Funding and Eni SPA 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 Eni SpA ADR 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 Eni SPA i.e., Eni SPA and Aegon Funding go up and down completely randomly.

Pair Corralation between Eni SPA and Aegon Funding

Taking into account the 90-day investment horizon Eni SPA is expected to generate 1.56 times less return on investment than Aegon Funding. In addition to that, Eni SPA is 1.27 times more volatile than Aegon Funding. It trades about 0.02 of its total potential returns per unit of risk. Aegon Funding is currently generating about 0.05 per unit of volatility. If you would invest  1,757  in Aegon Funding on September 2, 2024 and sell it today you would earn a total of  422.00  from holding Aegon Funding or generate 24.02% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Eni SpA ADR  vs.  Aegon Funding

 Performance 
       Timeline  
Eni SpA ADR 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days Eni SpA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady 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.
Aegon Funding 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 rather sound technical and fundamental indicators, Aegon Funding is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Eni SPA and Aegon Funding Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Eni SPA and Aegon Funding

The main advantage of trading using opposite Eni SPA and Aegon Funding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eni SPA 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 Eni SpA ADR 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.

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