Correlation Between EMCOR and Aegon NV
Can any of the company-specific risk be diversified away by investing in both EMCOR 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 EMCOR and Aegon NV into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EMCOR Group and Aegon NV ADR, you can compare the effects of market volatilities on EMCOR 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 EMCOR with a short position of Aegon NV. Check out your portfolio center. Please also check ongoing floating volatility patterns of EMCOR and Aegon NV.
Diversification Opportunities for EMCOR and Aegon NV
Poor diversification
The 3 months correlation between EMCOR and Aegon is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding EMCOR Group 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 EMCOR 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 EMCOR Group 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 EMCOR i.e., EMCOR and Aegon NV go up and down completely randomly.
Pair Corralation between EMCOR and Aegon NV
Considering the 90-day investment horizon EMCOR Group is expected to generate 1.4 times more return on investment than Aegon NV. However, EMCOR is 1.4 times more volatile than Aegon NV ADR. It trades about 0.37 of its potential returns per unit of risk. Aegon NV ADR is currently generating about -0.01 per unit of risk. 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 |
EMCOR Group vs. Aegon NV ADR
Performance |
| Timeline |
| EMCOR Group |
| Aegon NV ADR |
EMCOR and Aegon NV Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EMCOR and Aegon NV
The main advantage of trading using opposite EMCOR and Aegon NV positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EMCOR 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 EMCOR Group 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.| 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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